NTDPC Sector Reports Volume III Railways

1.
RAILWAYS
NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013
NTDPC~Vol 03_Part 1~Ch 01.indd 2 15-04-2014 11.15.51 AM

NTDPC | RAILWAYS 1

TABLE OF CONTENTS
INTRODUCTION 3 INTERNATIONAL EXPERIENCE IN RAILWAY
Importance of Railways in the Indian Transport REFORM: LESSONS FOR INDIAN RAILWAYS 75
Network 3 Separation of Infrastructure and Operation 75
Unbalanced Modal Mix and Cost to the Economy 4 Labour Reforms 77
Need for a Strategic Plan for IR 6 Lessons for Indian Railways 78
CURRENT STATE OF INDIAN RAILWAYS 7 ORGANISATIONAL REFORMS 78

Passenger Business 7 Current Organisational Structure and Issues 78
Freight Business 11 Need for Reforms 78
Parcel Business 15 Recommendations for Railway Reforms in
Other Businesses 16 Past Studies 79
Productivity in Indian Railways 16 Proposed Organisational Reforms 82
Financial Performance 17
SUMMARY OF RECOMMENDATIONS 92
INDIAN RAILWAYS: AN ASSESSMENT OF Organisational Reforms 95
DEMAND AND GOALS FOR 2032 22 Goals for 2032, Strategic Plan and
Vision for Indian Railways 22 Business Strategy 96
Planning for 2032 23 Freight and Parcel Business Strategy 96
Service Delivery and Customer Orientation 28 Passenger Business Strategy 96
Capacity Creation 96
INVESTMENT REQUIREMENTS AND Investment Planning 97
FINANCING PLAN 29 Project Execution 97
Investment Requirements 29 Tariff 98
Capacity Augmentation 29 Safety 98
Rolling Stock 32 Research and Development (R & D) 98
Stations and Terminals 34 International Rail Linkage 99
Technological Upgradation 34 Optimisation of Land Use 99
Suburban Transport 35 Information Technology 99
Summary of Investments Required and Human Resources 99
Phasing of Funding 36
Resource Mobilisation and Sources of Funding 38 ANNEXES 100
MAJOR ISSUES CONFRONTING RAILWAYS 39 REFERENCES 122

Capacity Constraints 40
Lack of Clarity on Social and Commercial
Objectives 41
Safety 53
Inadequate Research & Development 55
Human Resources Management 62
Optimisation of Land Use 65
Information and Communication
Technology (ICT) 66
International Rail Linkage 67
Energy Conservation 69
2 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

1.
RAILWAYS
Indian Railways (IR), managed directly by the Ministry of Railways, Government of India
(GoI), is the third largest railway network in the world under a single management. With
its network of 64,974 route km, IR has played a critical role in integrating markets and
connecting communities throughout the length and breadth of the country.
INTRODUCTION of passenger km) and the fourth largest rail freight

carrier in the world. During 2011-12, the freight
It is rightly referred to as ‘the lifeline of the Indian loading by IR stood at 970 million tonnes, and the
economy’ as it facilitates industrial and economic passengers transported, at 8.22 billion. The corre-
development by transporting materials such as sponding numbers in 1950-51 were 73.2 million tonnes
coal, iron ore, fertilisers and foodgrains. It touches and 1.28 billion respectively. Further, suburban traf-
the lives of people in both tiny villages and urban fic constitutes about 55 per cent of the total originat-
metropolises and assists the evolution of social forc- ing passengers and indicates the predominant role
es like urbanisation and inclusive development. of IR in urban transport segment in the four metro
cities of India. However, when viewed in terms of
Railways in India are a tool for development, passenger kilometres—a measure of throughput—
equity and integration of all parts to the main- suburban transport makes up about 15 per cent of
stream. Railways are considered critical not only the total.
from the standpoint of connecting remote regions
and providing affordable transportation services Over the years, the share of railways in freight and
(especially passenger services) but also from the passenger transport has declined and road transport
perspective of defence movements, (which cannot is emerging as the predominant mode for passenger
be passed on to the private sector) and meeting the and freight transport. The dominance of the road
transportation requirement in the wake of national sector in freight transport in India is corroborated by
emergencies and natural catastrophes. Given the two independent studies carried out by RITES Ltd2.
strategic role played by railways in the transporta- and McKinsey3. Both the studies estimate the share
tion space, rail transportation has been one of the of Railways in freight transport in Net Tonne Kilo-
three areas reserved for public sector in successive metres (NTKMs) in India to be around 36 per cent4
industrial policies of the country (the others being (Tables 1.1 and 1.2). The modal share of railways in
atomic energy and defence). freight transport is much lower in India relative to
other comparable large countries like the US and
IMPORTANCE OF RAILWAYS IN THE INDIAN China whose share is close to 50 per cent (Table 1.2).
TRANSPORT NETWORK Annex 1.1 summarises the railways’ share of domes-
tic freight for seven countries and highlights the
IR occupies a unique and crucial place in the coun- country specific factors affecting the modal share of
try’s transport infrastructure. Presently, it oper- freight.
ates 19,0001 trains a day, transporting 2.65 million
tonnes of freight traffic and 23 million passengers. The RITES study also shows that over the years
IR is the topmost rail passenger carrier (in terms IR’s share (in originating tonnage) has come down
1. Comprising 12,000 passenger trains and 7,000 freight trains.

2. Total Transport System Study (TTSS) on traffic flows & modal costs carried out by RITES for Planning Commission, GoI.
3. McKinsey’s Building India: Transforming the nation’s Logistics Infrastructure, 2010.
4. It is estimated that the share of railways in freight transport has declined further to about 33 per cent in 2011-12.
NTDPC | RAILWAYS 3

Table 1.1
Mode Share in Freight Traffic (2007-08)
MODE MODAL SHARE IN TOTAL ORIGINATING PERCENTAGE SHARE IN TOTAL TRANSPORT
TRAFFIC OUTPUT (PER CENT)
TONNES(MILLION) NTKMs (BILLION) TONNES NTKMs
Rail * @ 769 508 30 36
Highways (Road) @ 1,559 706 61 50
Coastal Shipping 59 86 2.3 6
Airways 0.28 0.29 0.01 0.02
IWT 55 3.5 2.1 0.24
Pipelines 113 105 4.5 7.5
TOTAL 2,555 1,409 100 100
Source: Total Transport System Study (TTSS) by RITES Ltd. (for Planning Commission, GoI).
Note:
* Includes IR & KRC ‘non-revenue’ inter-regional traffic as well as NTPC’s MGR traffic aggregating to 1.86 million tonnes and 26.1 million tonnes respectively.
@ Excluding intra-regional traffic of 96.6 MT by rail and 4640 MT assessed separately.
Table 1.2
Mode Share in Freight Traffic
(Per cent of NTKM)
5,275 Billion 5,930 Billion 1,325 Billion

100 Per cent = Tonnes-km Tonnes-km Tonnes-km
AIR 1 1 1
6
~14
30
WATER
36
48
47
RAIL
57
37
ROAD 22
CHINA US INDIA
Source: McKinsey’s Building India: Transforming the nation’s Logistics Infrastructure, 2010.
Note: Mode share estimated for 2007, excluding pipelines.
from 89 per cent in 1951 to 30 per cent in 2007-08 UNBALANCED MODAL MIX AND COST TO THE
(Figure 1.1). A similar trend is observed in pas- ECONOMY
senger transport, where the share of IR (in PKMs)
has declined from 74.3 per cent in 1951 to 12.9 Studies show that excessive reliance of India’s
per cent in 2004-05, while the share of road has freight transport on the roadways is not sustainable
increased from 25.7 per cent to 86.7 per cent during from the standpoint of both logistics and resource
the period5 (Figure 1.2). While the accuracy of this cost to the economy. The McKinsey study shows that
number could be open to challenge, the broad conclu- transportation by road is the most economical form
sion that road transport accounts for an overwhelm- of transport for distances up to 400 km. However, as
ing share of the total passenger transport is beyond distance increases rail and waterways become more
dispute. economical. Given that close to 65 per cent of the
5. Report of the Working Group on Railways, NTDPC (2012).

Figure 1.1
Railways’ Share in Originating Tonnage
[Per cent]
100
89
90 Railway share in origination tonnages over the years
80
70 65
60 53
50
40
30 30
20
10
0
1950-51 1978-79 1986-87 2007-08
Source: Total Transport System Study (TTSS) by RITES Ltd. (for Planning Commission, GoI)
Figure 1.2
Relative Share: Passenger Transport
[Per cent]
87
1951
74
2005
26
13
ROAD RAILWAYS
Source: Report of the Working Group on Railways, NTDPC (2012).
India’s freight traffic comprise bulk commodities based on their total resource cost and break-even dis-
and over 75 per cent (in NTKMs) is transported over tances derived therefrom. The assessment of actual
distances of more than 400 km, it can be more eco- and optimal modal mix computed on the basis of this
nomically served by rail and waterways6. methodology is summarised in Table 1.3.
The RITES Total Transport System Study (TTSS) has It shows that total throughput could increase by 44
estimated the total resource costs associated with billion tonne km (around 3 per cent) while cost of
different modes of transport, on the basis of finan- transportation could decrease by Rs 385 billion (con-
cial user costs as well as the social costs, and based stituting about 16 per cent of the total cost incurred
thereon had carried out an optimisation exercise on transportation during 2007-08), if the optimisa-
that would assign transport flows to different modes tion exercise could be undertaken in actual practice.
6. McKinsey and Company (2010).
NTDPC | RAILWAYS 5

Table 1.3
Actual vs Optimal Modal Mix (2007-08)
ACTUAL MODAL MIX OPTIMAL MODAL MIX
MODE FLOWS COST THROUGHPUT FLOWS COST THROUGHPUT
Million Tonnes Billion Rs Billion NTKM Million Tonnes Billion Rs Billion NTKM
Rail 736 497 499 1,704 1,423 1,169
Road 1,559 1,556 692 591 245 66
Coastal 60 34 90 60 34 90
Total 2,355 2,087 1,281 2,355 1,702 1,325
Source: Total Transport System Study (TTSS) by RITES Ltd. (for Planning Commission, GoI).
Note: Coastal flows not subjected to the optimal analysis.
Table 1.4
Comparison of Environmental and Social Sustainability of Rail and Road
Transport
Energy Consumption • As compared to road, rail consumes 75 per cent to 90 per cent less energy for freight
traffic and 5 per cent to 21 per cent less energy for passenger traffic
Financial • Unit cost of rail transport was lower than road transport by about Rs 2 per NTKM and
Costs Rs 1.6 per PKM (in the base year 2000)
Environmental • Rail transport emits 17 gram CO2 equivalent per PKM as compared to 84 gram per PKM
Damage in case of road transport
• Rail transport emits 28 gram CO2 equivalent per NTKM as compared to 64 gram per
NTKM in case of road transport
Accident • Accident costs on road are significantly higher than those on rail
Costs • For passenger transport, road accident costs are 45 times higher than rail
• For freight transport, road accident costs are 8 times that of rail
Social Costs • In terms of all-inclusive costs or social costs, railways have a huge advantage over road
(All-Inclusive Costs) transport (the advantage is more in case of freight traffic)
• For urban areas, the cost advantage of rail (in the base year 2000) was as much as
Rs 2.8 per NTKM and Rs 1.7 per PKM
• For non-urban areas, the cost advantage of rail (in the base year 2000) was as much as
Rs 2.5 per NTKM and Rs 1.7 per PKM
Source: AITD report on ‘Environmental and Social Sustainability of Transport- Comparative Study of Rail and Road’ (2000); International Union of Railways (UIC); McKinsey’s
Building India: Transforming the nation’s Logistics Infrastructure, 2010; Report of the Working Group on Railways (NTDPC).
However, the optimisation model should be used recommended modal mix in favour of railways.
with due caution as it represents an extreme theoret- This requires making a strategic decision in terms
ical case, with the share of rail in total throughput of the relative allocation of resources between rail
estimated as 88 per cent. and road, and accompanying pricing and taxation
policies which can then be used to nudge transport
Social and Environmental Costs: A number of stud- demand towards the desired modal shares.
ies carried out in the global context have established
that railways are more energy-efficient and eco- NEED FOR A STRATEGIC PLAN FOR IR
friendly than other modes of transport (Table 1.4).
Any shift of traffic from road to rail, especially in India needs an efficient and sustainable transport
freight, would, therefore, result in substantial sav- infrastructure to sustain the pace of economic
ings in energy consumption as well as reduced social growth. The quality, capacity and performance of
costs. In view of the expected uncertainties related railways would be of crucial importance in this
to the availability of future crude oil supplies, the regard. Roads are the dominant mode of transporta-
attendant implications for energy prices, and the tion in India today (for both passenger and freight
adverse environmental impact of fossil fuels, it is traffic), while IR has been suffering from severe
essential that an attempt be made to maintain the capacity constraints and remains underinvested.

Figure 1.3
Mode Share in Freight: 2010 to 2020
2010 2020
1 1 1
AIR
6 5 6
WATER
25
36
RAIL 46
69
57
47
ROAD
Current From current trajectory... ... to balanced modal mix
Source: McKinsey’s Building India: Transforming the Nation’s Logistics Infrastructure, 2010.
The road sector has witnessed a surge in invest- growth experienced in the passenger and freight
ments (both public and private) as the government businesses underlining current trends, followed by
launched the ambitious National Highways Develop- an examination of the productivity and financial
ment Project (NHDP). performance of IR as a whole. International bench-
marking is necessary to realise the gap in produc-
IR is uniquely placed to serve the needs of the rapid- tivity and technology that is prevalent in IR and the
ly expanding and modernising Indian economy and urgency needed to bridge this gap becomes clearly
meet the aspirations of the country. It is imperative evident. Finally, a deeper analysis of tariffs and
for IR to draw out a strategic plan/programme so as cost structures in the passenger and freight busi-
to restore the balance in intermodal mix, as the cur- ness brings out the challenges that currently exist
rent trajectory will reduce the share of railways in due to cross-subsidisation, current tariff practices
freight transport to 25 per cent by 2020 (Figure 1.3). and capacity constraints. These practices have had a
IR has to institutionalise a strategic planning pro- significant impact on IR’s financial and operational
cess taking a forward view over the next 20 years. performance over the years and understanding the
The strategic plan has to be necessarily prepared current state of affairs of railways is the first step
involving the Zonal Railways and key stakeholders forward towards positive change.
and will clearly lay down the goals to be aimed at and
attained and the path to be traversed. A multi-year PASSENGER BUSINESS
investment plan fully supported by a credible fund-
ing plan will form the bedrock of the strategic plan. As mentioned earlier, Indian Railways provides pas-
senger services of a large magnitude in both the
suburban and non-suburban (that is, intercity/long
CURRENT STATE OF INDIAN RAILWAYS distance) segments. In the latter category, there is a
large variety—Rajdhani, Shatabdi, non-stop Duron-
In order to analyse the current state of IR, opera- to, mail/express, passenger trains, etc. Yet, IR is not
tions and performance in each of its business seg- able to meet the demand in full. Railways have an
ments have been looked into separately (passenger, excellent operating protocol in place to run around
freight, parcel and others). We have focused on the 12,000 passenger trains a day. Train services are, by
NTDPC | RAILWAYS 7

Figure 1.4
Growth in Originating Passenger Traffic, CAGR
[Per cent]
7
Suburban
6.2
Growth in Originating Passenger Traffic, CAGR (Per cent)
6 Non Suburban
Suburban and Non Suburban
5 5.1
4.7
4
3.6
2 2.2
1
0.5
0
1951-61 1961-71 1971-81 1981-91 1991-01 2001-11
-1
Source: Report of the Working Group on Railways (NTDPC), Yearbook 2010-11.
and large, reliable and popular. However, these do tionally high over the last decade (2001 to 2011), as it
not compare with best–in-class passenger railway increased by 522 billion PKM (CAGR of 7.9 per cent),
systems elsewhere in the world in terms of speed, in comparison to an increase of only 390 billion PKM
reliability and comforts; for a host of reasons such (CAGR of 3.9 per cent) during the preceding 40-year
as infrastructural and capacity limitations, low level period (1951 to 2001). The growth in PKM over the
of technology, maintenance systems and procedures last decade has been supported by the fast growth
and poor upkeep of stations and coaches. While witnessed in non-suburban traffic. As of March 2011,
most developed countries have high speed railways non-suburban passengers comprised 47 per cent of
(speeds up to 300-350 km per hour) and have rebuilt the total originating passengers and accounted for
their conventional tracks for speeds up to 200 km close to 86 per cent of total PKM (Figure 1.5).
per hour, the maximum permissible speed on IR is
only 150 km per hour and the average speed actually The average lead of passengers has increased from
achieved, lower in the range of 60-70 km per hour. 52 km in 1951 to 128 km in 2011. While average lead in
suburban category has become twice (16 km to 34 km),
Over the last six decades, the number of originating average lead in non-suburban category has grown
passengers on IR has increased by almost six times, more than 3.5 times (66 km to 234 km) over the same
from 1.3 billion in 1950-51 to 7.6 billion in 2010-11. period. Further, over the last decade, lead in the non-
During the period 1951–2001, the suburban passenger suburban category increased much faster (CAGR of
category was driving the growth in total originating 3 per cent) compared to suburban category (CAGR of
passengers with a compounded annual growth rate 0.8 per cent) over the same period (Figure 1.6).
(CAGR) of 4 per cent as compared to a CAGR of 1.6
per cent for non-suburban category. However, dur- Within the non-suburban category, passenger lead
ing the last decade (2001-11) the trend reversed and for the upper class segment has shown the highest
non-suburban passenger category has been the key rise, as it quadrupled from 152 km in 1950-51 to 623
driver of growth in total originating passengers with km in 2010-11; while leads for the other two segments
a CAGR of 6.2 per cent, compared to 3.6 per cent for (second class ordinary and mail/express) doubled
the suburban passengers (Figure 1.4). during the same time period (Figure 1.7).
Total passenger kilometres (PKM) increased to However, despite the spectacular rise in passen-
almost 15 times, from 67 billion in 1951 to 979 bil- ger lead, the upper class segment accounts for only
lion by 2011. The growth in PKM has been excep- 7 per cent of total PKM of the non-suburban cat-

Figure 1.5
Passenger Kilometres on IR
[in Billions]
Year 1951 to 2001 Year 2001 to 2011
1,200
Non-Suburban
1,000 979
Suburban
903
nt 838
er ce
800 7.9 P 770
695
PKM (In Billions)
616
600 576
541
515
491 841
457
t
cen
400 Per
3.9
296
368
209
200
118
67 78
137
89
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Source: Report of the Working Group on Railways (NTDPC), Yearbook 2006-2007, Yearbook 2010-11.
Figure 1.6
Passenger Lead on IR
[Km]
250
234
Year 1951 to 2001 Year 2001 to 2011
207
200
177
Passenger Lead (Km)
150 128
107
95
100
66
50 33 34
52 31
16
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Suburban Non Suburban Suburban and Non Suburban

NTDPC | RAILWAYS 9

Figure 1.7
Passenger Lead in Non-Suburban Category
[Km]
800
700 659
623
570
600
471 479
449
Passenger Lead (Km)
500
400
300 234
241 207
177
200 152
112 114
82
100 66
55
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Upper Class Mail/Express Second Class Ordinary Non Suburban
Figure 1.8
Passenger Kilometres for Non-Suburban Category
[in Billions]
900 841
2010-11
Upper Class (Per cent share)
800
Mail/Express
[33]
700 Second Class Ordinary
PKM (in Billions)
600
500
400 368
[60[
[32]
300
236
200 167
[38]
[45] [61]
95
100 60 66 [58]
[61] [56]
[73] [52]
[34] [40] [7]
[21] [3] [4] [7]
0
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11
[ ]Figures in parentheses are per cent share

Box 1.1
Indian Railways’ Network Capacity
64,460 km Length of route network as of March 2011

85.6 per cent Broad Gauge (BG)
10.6 per cent Metre Gauge (MG)
3.8 per cent Narrow Gauge (NG)
Traffic flows on IR’s network are highly uneven and imbalanced. As of March 2011, the BG network,
though forming 85.6 per cent of the route, generated almost 98 per cent of the passenger output (PKMs)
and 99.9 per cent of the freight output (NTKMs). Further, passenger trains utilise nearly 65 per cent
of network capacity but contribute to less than 30 per cent of the revenue. The Golden Quadrilateral
and the diagonals connecting the four major metros, vis., Delhi, Kolkata, Chennai and Mumbai (along
with the east-west diagonal extending to Guwahati) constitute less than 16 per cent of the route, but
account for more than 50 per cent of the passenger and freight traffic. These routes have reached over
saturated levels of capacity utilisation and at present are strained to the breaking point (See chart). A
line-capacity utilisation of 80 per cent is considered optimum as smooth operation of trains requires
some slack in the line-capacity to absorb and recover from unforeseen disruptions.
LINE CAPACITY UTILISATION OF SECTIONS ON HIGH DENSITY NETWORK IN 2009-10
Less than 80%

Mumbai - Chennai 10 9 5 2 26
80% - 100 %
Howrah - Chennai 1 4 7 5 17
100% - 120%
Delhi - Chennai via Jhansi,
Nagpur-Ballarshah 3 2 5 13 2 25 120 % - 150%
Delhi - Guwahati via Sitapur- More than 150 %

Gorakhpur-Barauni-Katihar 2 13 5 5 8 33
Delhi - Mumbai 3 5 4 11 5 28
Mumbai - Howrah 2 7 19 13 1 42
Delhi - Howrah 2 8 9 17 5 41
0 15 30 45
Number of Sections
212 Total sections on the High Density Network (HDN)
141 Sections with line capacity utilisation exceeding 100 per cent
189 Sections with line capacity utilisation exceeding 80 per cent
Source: Ministry of Railways, Yearbook 2010-11.
egory, as this segment has a small base of originat- services share the track and infrastructure with pas-
ing passengers (100 million in 2010-11), equating senger trains, but have lower priority vis-a-vis the
to 3 per cent of the non-suburban passengers and latter in operational matters. There is a huge imbal-
1 per cent of the total passengers (Figure 1.8). ance in the pattern of train operations: the trunk
routes of the railways, which comprise 16 per cent of
FREIGHT BUSINESS the network (connecting the four metro cities), carry
close to 60 per cent of the freight and more than 50
Freight trains constitute approximately 35 per cent per cent of the passenger traffic and are, therefore,
of the total 19,000 trains run daily on IR network, but oversaturated (Box 1.1).
yield more than 65 per cent of the revenue. Freight
NTDPC | RAILWAYS 11

Box 1.2
Efficiency of Heavy Load Trains
In most of the freight railways reviewed high density flows of rail-friendly traffics have created ben-
eficial opportunities to operate longer, heavier trains and attain lower unit costs. Australia, Brazil,
Canada, China, Russia and the USA have all pursued heavy axle loads, better wagon design and mini-
misation of dead-running to provide higher net-to-tare ratio, coupled with longer freight train length
to reduce unit crew costs and (in some cases) release useable capacity. Germany and Japan are more
constrained by the limited market availability of bulk freights (particularly coal), by their relative-
ly short freight-hauls, and by the constraints of network parameters basically geared to passenger
demands, but nevertheless they have also sought within their constraints to achieve the same sorts of
efficiencies.
COUNTRY EXAMPLES OF HEAVY-LOAD TRAINS AND TYPICAL FREIGHTERS

Australia Typical interstate freighters: East-West 5,000 tonnes, North-South 2-3,000 tonnes.
Dedicated freight lines: Rio Tinto: 30,000 tonnes iron ore trains
BHP Billiton: 44,500 tonnes iron ore trains
Leigh Creek: 10,000 tonne coal trains
Brazil Typical freighters: Various

Dedicated: Carajas Railway: 23,000 tonne iron ore trains
Canada Typical long-distance freighter:
Canadian National bulk trains: up to 20,000 tonnes
China Typical long-distance freighter: 4,000 tonnes
Dedicated: Daqin Railway (mainly coal): 20,000 tonne coal trains
Germany Trains typically constrained to 740 metres but 835 m trains being introduced
Hamburg to/from Denmark and long-term feasibility of running 1,500 m trains on key routes is being
examined.
Japan N/A
Russia Typical long-distance freighters: 4,000 tonnes
Iron ore to Finland: 5,500 tonnes
United States Typical freighters: 3,000-5,000 tonnes.
Double-stack container trains: typically 5,000-8,000 tonnes
Some iron ore and coal trains: 10-20,000 tonnes
International containers have been a major rail freight growth market in all the countries reviewed.
The USA and Canadian railways are leaders in the field with further multi-billion dollar investments
planned. Double stacking has been facilitated by the USA’s high average axle-loads (more than 50 per
cent higher than Europe) and the fact that primarily diesel locomotive haulage provides higher load-
ing gauge than would an electrified system with overhead wires. Australia has introduced double-
stack wherever density of flows and the loading gauge permit it and China is currently adapting a
number of routes from ports for double-stack. In the other countries constraints of current loading
gauge and/or lack of market density make it difficult economically to justify the heavy cost of adapta-
tion works, but it is likely that at least a few key routes will be fitted for double-stack in due course.
Source: Freight Railways Governance Organisation and Management: An International Round-up, World Bank, Paul Amos, July 2011.
Lower operational priority and oversaturation have in China, South Africa, Brazil and Australia. The
implications for quality of service of freight trains position can change only when the Dedicated Freight
and severely restrict IR’s ability to meet customer Corridors (DFCs) get operational, as trains with
expectations. Speed of freight trains has largely maximum gross load of 12,000 tonnes are expected to
remained stagnant and improved only marginally run on the DFCs.
from 25 to 29 km per hour over the last three decades.
These capacity constraints need to be further viewed Furthermore, freight services are managed with
in the context that IR does not operate truly heavy- excessive stress on productivity of assets rather than
haul freight trains that bring high level of cost-effi- satisfaction of customers’ needs. Productivity of
ciency to freight operations as the infrastructure is assets is undeniably a worthwhile objective to pur-
common to both, the passenger and freight trains sue and improved rake utilisation over the years has
(Box 1.2). The maximum gross load carried on trains enabled IR to meet requirements of bulk customers.
in IR is 5,400 tonnes, compared to 20,000-37,000 tonnes However, there is a need to strike a balance between

Box 1.3
Auto-Carriage Opportunities
Auto-carriage is a typical example of what railways are losing and why. Globally, automobiles are most-
ly carried by rail. IR’s share in India’s growing automobile production and transportation is a mere 2
per cent. Railways do not have proper wagons to transport automobiles efficiently, nor well designed
terminals. The few make-shift wagons that have been designed are not capable of carrying optimum
number of cars per wagon. The terminal infrastructure for handling is absent. Investment by automo-
bile companies does not come forth as the facilities cannot be shared with competitors and single-user
volumes may not justify stand-alone investment. Automobile companies or third-party logistics pro-
viders can bring proven wagon designs from, say, the USA or Europe, but the RDSO’s approval process
is tedious, protracted and uncertain. Similar issues beset the transport of bulk cement, fly-ash and
other potentially voluminous commodities not carried by rail in any sizeable quantity now.
The Ministry did announce a large number of policy initiatives in 2010 under the Public Private Part-
nership model to attract private sector investment in several areas - auto-carriage rolling stock, ter-
minal development, development of ware houses, construction of railway lines, operation of tourist
trains etc.
The initiatives have not been successful, indicating the need for a review of the terms and conditions
including a dialogue with the interested parties for setting at rest their apprehensions.
Source: Report of the Working Group on Railways (NTDPC).
optimising asset utilisation and fulfilling the cus- Figure 1.9b provides commodity-wise trends in freight
tomer’s requirements if the aim is to increase rail- growth over the period 2001-02 to 2010-11.
way’s share of cargo handled. IR does not perceive
or define the freight business in terms of delivering Growth and Performance of Freight: Figure 1.10
transport or logistics solutions. Railways’ customers provides the growth of freight traffic in terms of total
have negative perceptions on its handling of demur- loading and freight output (in million tonnes and bil-
rage (detention of rolling stock at terminals) and lion NTKMs respectively), as well as average lead (in
disposal of claims. Parcel size of cargo is presently km). Total loading of revenue earning freight traf-
restricted between the ranges 2,400 metric tonnes fic during 2010-11 was 922 million tonnes compared
and 3,800 metric tonnes and, therefore, cuts out many to 73 million tonnes in 1950-51. Similarly, the freight
customers even in the bulk cargo segment. output increased from 38 billion NTKMs to 626 billion
NTKMs over the same period. Further, during the last
IR does not take responsibility for last-mile connec- decade (2001-11), the growth rate in freight loading
tivity, nor does it incentivise customers to invest in and output has been much faster (CAGR close to 7 per
such facilities. There is no institutional arrange- cent7), compared to the preceding five decades (1951-
ment to attract and aggregate traffic of smaller 2001) when they grew at CAGR of around 4 per cent.
parcel sizes (less than train-loads). As a result, IR is The average lead increased from 513 km in 1950-51 to
losing out in high potential markets like fast-grow- 754 km in 1980-81, but it consistently declined thereaf-
ing consumer durables and information technol- ter and stood at 679 km in 2010-11.
ogy (CDIT), fast moving consumer goods (FMCG),
hazardous chemicals, bulk cement, fly ash, automo- Despite the higher growth witnessed in freight traf-
biles and containerised cargo; where their share is fic during the last decade, IR’s performance is much
low or negligible (Box 1.3). This traffic now moves below the potential. Given the average GDP growth
mostly by road. of around 8.5 per cent from 2005-06 to 2010-11, and
the transport elasticity to GDP of 1.25, IR’s freight
Given the above constraints, IR has focused on carry- could have grown at CAGR of greater than 10 per
ing bulk cargo in train-loads dominated by a narrow cent, while it grew only close to 7 per cent during the
basket of nine commodities such as coal (46 per cent), period. In meeting the demand generated by the eco-
iron ore, cement, fertilisers, steel, raw materials for nomic upturn, the main challenges faced by IR were
steel plants except iron ore, foodgrains, petroleum the constraints of infrastructure, particularly line
products and container traffic, together these account capacity on busy routes, and terminal detentions on
for over 90 per cent of the freight traffic (Figure 1.9a). account of underinvestment.
7. There was a dip in freight growth in 2008-09 due to the economic slowdown and the target of 850 MT of loading could not be met; consequently freight growth
was only 5 per cent.
NTDPC | RAILWAYS 13

Figure 1.9a
Commodity Basket for IR (2010-11)
[Per cent]
OTHERS
PIG IRON & 8
FINISHED STEEL*
CONTAINER 5
SERVICE
4
COAL
46
MINERAL OIL
(POL)
4
FOODGRAINS
5
FERTILISER
5
IRON ORE
13
CEMENT
11
Source: Yearbook 2010-11.
Note: *Pig iron and finished steel includes raw material for steel plants except iron ore.
Figure 1.9b
Freight Growth: Select Commodities
Others
1,000
900
192 Food Grains

800
700 43
48
Fertiliser
600 123
Tonnes (in Millions)
99
42
500
33 118
94 61
Cement
400
33
27 113
44
300
64
420 Iron Ore
200
294
100 230
Coal
0
2001-02 2005-06 2010-11
Source: Ministry of Railways Yearbook 2010-11, Yearbook 2005-2006, Yearbook 2004-2005.

Figure 1.10
Freight Traffic on IR
Loading (Million Tonnes) Freight output (Billion NTKMs) Lead (Km)

1,000
922
900
794
800
684 679
700 659 660 657
600 557
513 626
474
500
521
400
300 381
168 312
200
73
100
111
38
0
1950-51
1960-61
1970-71
1980-81
1990-91
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Source: Report of the Working Group on Railways (NTDPC), White Paper on Indian Railways, Year Book 2010-11.
Table 1.5
Parcel Traffic and Earnings
INCREASE OVER INCREASE OVER
TONNAGE EARNINGS
YEAR PREVIOUS YEAR PREVIOUS YEAR
(MILLION TONNES) (RS BILLION)
(PER CENT) (PER CENT)
2001-02 3.4 - 4.4 -
2002-03 3.5 3.2 4.6 5.0
2003-04 3.9 10.8 4.8 3.9
2004-05 4.2 7.2 5.3 11.7
2005-06 4.6 10.5 6.4 19.7
2006-07 4.9 6.7 9.0 41.2
2007-08 5.5 12.2 10.0 12.0
2008-09 5.9 6.7 10.8 7.2
Source: Special Study for setting up of FBO for parcel traffic, CRISIL Infrastructure Advisory, ADB TA No. 4053.
PARCEL BUSINESS The importance IR attaches to this segment of busi-

ness can be gauged from the fact that no separate
At present, parcel services are treated as a peripheral statistics pertaining to parcels is maintained and pub-
activity and managed as an associated service along lished; the Indian Railways Statistical Year Book gives
with passenger trains; Railways Act defines a ‘parcel’ no figures. Table 1.5 indicates the quantum of parcel
as ‘goods entrusted to a railway administration for traffic carried along with other related statistics.
carriage by a passenger train or parcel train’, there
being no other elaboration or explanation. There is The higher growth, both in terms of tonnage and
little marketing support and backward/forward ser- earnings, has been due to a number of steps taken by
vices by IR. Freight and passenger segments of the the IR such as leasing of parcel vans, relating tariff
business receive the attention of IR’s management to the class of service chosen, instead of commodity
at all levels and at all times; this is not the case with as earlier; obtaining, designing higher capacity par-
parcel traffic. This has handicapped the growth of cel vans and running of point-to-point parcel trains.
the business. The end result is carriage of parcels And, despite the growth, in absolute terms, the quan-
is a loss-making activity for the IR; in the financial tum of parcel traffic is insignificant. A study done
year 2008-09, the net loss for this segment of business by CRISIL Infrastructure Advisory (for Asian Devel-
was estimated to be as high as Rs 18 billion. opment Bank) for setting up of a focused business
NTDPC | RAILWAYS 15

Figure 1.11
Staff Productivity
1.8 1,800
1.7
1.6 1,604
1.6
1.6 1,504 1,600
1.4
No. of Staff 1.4
1.4 (in Millions) 1.3 1,400
Output (NTKM + PKM) in Billions

1,176
1.2 1,200
No. of Staff (in Millions) and
1.2
NTKM + PKM
Staff Productivity
1.0 (in Billions) 1.1 1,000
769
0.8 800
0.84
0.6 531 600

Staff productivity
Traffic units (NTKM +
356 PKM per staff
0.4 0.5 (in Millions)) 400
0.2 0.33 200

0.23
0.0 0
1980-81 1990-91 2000-01 2006-07 2009-10 2010-11
No. of Staff (in Millions)

NTKM + PKM (in Billions)
Staff productivity-Traffic units (NTKMs + PKMs) in Millions per staff
Source: Report of the Working Group on Railways (NTDPC), Year Book 2009-10, Year Book 2010-11.
organisation for parcel traffic estimated8 that move- served on trains, etc. Laying optic fibre along the
ment by road was over 400 million tonnes in 2007-08; railway tracks and leveraging the optic fibre net-
IR’s share is thus just 1 per cent. work for broadband would be yet another avenue. IR
has not been able to fully exploit the potential from
The size of the parcel business in the country is huge these sources as these activities are not managed
and expanding rapidly but IR’s share is negligible. A professionally as separate profit-centres.
shift from road to rail is obvious for leads of 500 km
and above. An efficient ‘rail-borne parcel traffic’ has PRODUCTIVITY IN INDIAN RAILWAYS
to be multimodal if it has to be user-centric; institu-
tional aggregation is a basic requirement. Collection Staff Productivity: Over the years, produc-
and delivery have to be at locations decided by the tivity measured in terms of transport output
users, with a single agency dealing with all maters (NTKM+PKMs in millions) per employee of IR
documentation, enquiries, tracking, financial and has increased from 0.23 (1980-81) to 1.2 (2010-11)
tariff-related issues, claims, etc. This activity needs (Figure 1.11). The major force driving the marginal
to be managed professionally as a separate business increase in productivity has been the increase in
unit that combines the advantages and strengths of transport volumes due to technology upgrade and
rail movement with those of road; otherwise IR will appropriate operating strategies, combined with
not be able to take advantage of the opportunities in reduction in the number of employees from a peak
the market for parcel movement. of 1.65 million in 1990-91 to 1.32 million in 2010-11.
OTHER BUSINESSES It is, however, important to compare productiv-

ity figures internationally. On doing so, we see that
Sundry earnings from sources like advertising and the productivity of employees measured in terms
commercial utilisation of surplus land currently of average transport output for 2006-07 is relatively
contribute around Rs 34 billion per annum (2010-11). low for India (0.84) compared to the US (15), Can-
The vastness of the network and large masses of ada (10.4), Japan (2.1), Russia (2) and China (1.4)
people who use railway stations and facilities offer (Figure 1.12). The much higher staff productivity in
an attractive opportunity for advertising on freight the US and Canada vis-à-vis India; China and Russia
and passenger trains, CCTVs at stations, on-board can be partly explained by the difference in overall
magazines for passengers, merchandising oppor- freight and passenger mix, as the larger passenger
tunities on tickets, foodstuffs and other materials volumes handled in India, China and Russia require
8. Based on the Total Transport System Study done by RITES, and 22 commodities that are amenable for transport as parcels by rail.

Figure 1.12
Staff Productivity Comparison (2006-07)
Staff Productivity - Traffic units (NTKM + PKM)
in million per employee (2006-07)
JAPAN 2.1
CHINA 1.4
INDIA 0.84
AUSTRALIA 3.6
S. AFRICA 3.4
CANADA 10.4
USA* 15.1
RUSSIA 2.0
GERMANY 0.72
FRANCE 0.76
0 8 16
Source: Report of the Working Group on Railways (NTDPC), White Paper on Indian Railways, UIC 2007.
Note: * US data for AAR Class 1 and Amtrak.
a more labour-intensive service response than capacity constraints hamper IR’s effort to diversify
freight. Similarly, several other factors such as the into other segments. Increase in expenditure due to
state of the infrastructure, the level of technology, higher wage and fuel bills complete the picture of
the skill of the workforce and quality of the man- financial distress.
agement, the degree of outsourcing, etc. also influ-
ence the productivity as measured by conventional Working Expenses: Operating and maintenance
parameters. expenses incurred by IR can broadly be divided into
staff costs (including payment of pension), fuel costs,
Asset Productivity: Box 1.4 provides estimates material costs, lease charges and other miscellane-
(based broadly on 2009 data) of asset productivity for ous expenditure. Of these, wages and pension con-
India and five other countries. stitute about 51 per cent, fuel 16 per cent, stores for
operation and maintenance 4 per cent, lease charges
FINANCIAL PERFORMANCE for rolling stock procured through borrowings 4 per
cent and miscellaneous expenditure 8 per cent of the
Figure 1.13a provides a snapshot of IR’s financial earnings. Contribution to the depreciation reserve
performance over the period 2004-05 to 2010-11. A fund (DRF) for the replacement of assets takes away
combination of factors such as booming growth in another 4 to 6 per cent of the earnings. Thus close to
the core sector and mineral industries; and IR’s deci- 85 per cent of the revenue is committed and invari-
sions to raise the axle load of existing wagons from able in the short run. Drastic restructuring or staff
20.8 tonnes to 22.8 tonnes (thereby increasing the rationalisation and wage freeze are not politically
carrying capacity by 15 per cent), operate longer pas- and administratively feasible. Viability in the short
senger trains, rationalise freight classification and run, therefore, dictates that the volumes expand at
introduce market-focused tariffs (e.g. lean season and viable tariff levels. In 2008-09, there was a consider-
empty flow discounts) contributed to improvement able jump in the working expenses of the railways,
in the railway finances during the period 2005-06 to on account of the disbursement of Sixth Pay Com-
2007-08. However, once these had run their course mission arrears and increased salaries and wages
and the impact of award of the Sixth Pay Commis- and rates of allowances. Manpower productivity has
sion had to be absorbed, the operating ratio, which steadily improved over the years and this has con-
is used as a rough index of the health of the railway tributed to an increase in earnings and lower costs.
finance, has climbed back into the 90-100 range, leav- However, the challenges of the coming years would
ing very little surplus for reinvestment. The sharp necessitate much higher levels of productivity.
deceleration in revenue generation is mainly due to
non-revision of passenger tariff for 10 years in a row Earnings: Total earnings of IR have doubled over
and slowdown in the growth of the core sector, which the period 2004-05 to 2010-11 from Rs 470 billion to
is a primary contributor to railway freight. Further, Rs 945 billion (Figure 1.13b). Freight earnings have
NTDPC | RAILWAYS 17

Box 1.4
International Comparison of Asset Productivity
Network utilisation: The three networks that handle substantial passenger volumes (India, China and
Russia) as well as freight have the highest overall network use, but such use can also be heavily influ-
enced by the technology and operational standards. The average is also affected by the relative inten-
sity of use of different parts of the network. For example, whereas nearly China’s entire network is
heavily used, the Indian average contains around 9,000 kms (more than 14 per cent of the network) of
little-used non broad-gauge lines carrying only around 1 per cent of rail traffic.
Locomotive productivity: The achievable productivity is partly influenced by the markets offering,

which differ from country to country. Modern locomotive types and technologies also have higher
haulage capability. Productivity is also influenced by the maintenance standards and efficiency of
equipment. India is significantly behind other countries in locomotive productivity.
Asset Productivity Estimates (2009)
Network Utilisation (Traffic Loco Productivity (Traffic Wagon Productivity (Net Tonne-
Units/Route-Km/Year) Millions Units/Loco/Year) Millions Km/Wagon/Day)
INDIA 22 66 7,781
USA* 11 98 4,637
RUSSIA 24 93 5,156
CHINA 39 146 11,816
CANADA 5 112 11,099
BRAZIL 9 103 8,334
0 20 40 0 75 150 0 6,000 12,000
Note: * USA data for Class 1 railroads only
Wagon productivity: The achievable productivity depends partly on traffic mix; other things equal, it
should be higher with longer length of haul, higher proportions of bulk relative to non-bulk traffic,
and the use of non-specialist wagons for a variety of traffic types. It is also influenced by train operat-
ing strategies and the efficiency of customers’ terminal operations. High utilisation generally assists
in controlling operating costs, but it can occur at the expense of customers: for example many custom-
ers may prefer to use specialised wagons.
Source: Freight Railways Governance, Organisation and Management: An International Roundup; The World Bank; Paul F. Amos, 7 July 2011.
been the backbone of IR’s revenues, accounting for (1980-85) onwards. The total public sector investment
almost two-thirds of the total earnings. Earnings has increased manifold from around Rs 66 billion in
through commercial publicity account for a very the 6th Plan, to around Rs 1,900 billion in the 11th Plan.
small percentage of IR’s earnings even though great However, the IR’s expenditure as a percentage of the
scope exists for advertising initiatives in the interi- transport sector expenditure has varied consider-
ors of trains and at stations. Figure 1.14 shows the ably over the Plan periods, as it moved from a peak
growth rate of earnings over the reference period. of 67 per cent in the 3rd to a low of 30 per cent in the
The growth rate of total earnings has declined in the 11th Plan (Figure 1.15).
recent years, after growing at CAGR of more than 14
per cent during 2004-05 to 2008-09 (led by the strong One of the key challenges faced by IR is finding
economic growth during that period). The growth of resources to finance rail infrastructure that must be
freight earnings has also declined to single digits in improved to bridge the current technology gap and
recent years, after growing at a peak of 18 per cent capacity constraints. IR must not only meet opera-
during 2005-06. tional expenses but must also generate adequate
resources for replacement and planned investments.
Investments & Sources of Funding: The total Railways Plan expenditure is financed through a
investment in railways in each successive plan combination of internal generation; money from
started increasing at a sharp rate from the 6th Plan the general exchequer extended as gross budgetary

Figure 1.13a
Gross Traffic Receipts, Total Working Expenses and Operating Ratio
1,000 95 95 100
90 90
900 84 90
78 76
Total Working Expenses (Rs Billion)
800 80
Gross Traffic Receipts and
700 70
Operating Ratio
600 60
(Per cent)
500 50
400 40
300 30
474 545 627 717 799 870 945
200 20
428 456 490 545 718 829 895
100 10
0 0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Gross Traffic Receipt (Rs Billion) Total Working Expenses (Rs Billion) Operation Ratio (Per cent)
Figure 1.13b
Total Earnings
[Rs Billion]
2010-11 628 258 59 945
2009-10 585 235 51 871
2008-09 534 219 45 798
2007-08 474 198 44 716
2006-07 417 172 34 624
2005-06 363 151 30 544
2004-05 308 141 21 470
0 100 200 300 400 500 600 700 800 900 1,000
Earning in Rs Billion
Freight Earnings Passenger Earning Other Coaching & Sundry Earning
NTDPC | RAILWAYS 19

Figure 1.14
Growth in Earnings
[Per cent]
20 18
18 16
15 15 15 15
16
14 14
13
14
Earnings Growth (Per cent)
11 11 11
12
10 10
10 9 9 9
8 7 7 7
6
6
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Freight Earnings Growth Passenger Earnings Growth Total Earnings Growth
Source: White Paper on Indian Railways 2009, Yearbook 2010-11.
Figure 1.15
Trends in Railway Investments
2,500 80
Railways Expenditure
Railways Expenditure as per cent of Transport
Sector Expenditure
67 70
66
2,000 1,921
56 60
Railways Expenditure as per cent of
Railways Expenditure (Rs Billion)
Transport Sector Expenditure
50
49
47 50
1,500
37 38
36 40
37
1,000
841 30
30
20
457
500
322
10
165
21 66
2.2 7.2 13.3 9.3
0 0
1ST 2ND 3RD 4TH 5TH 6TH 7TH 8TH 9TH 10TH 11TH
(1951-56) (1956-61) (1961-66) (1969-74) (1974-79) (1980-85) (1985-90) (1992-97) (1997-2002) (2002-07) (2007-12)
Source: Various Five Year Plans, Planning Commission.

Figure 1.16
Sources of Funding for 10th, 11th and 12th Five Year Plans
[Per cent and Rs Billion]
12TH Plan
10TH Plan 11TH Plan (2012-17)
(2002-07) (2007-12) (projected)
20
27
38 37
45 43
35
35
20
6,000
GBS Including Diesel Cess Internal Resources Extra Budgetary Resources
5,000
Sources of Funding (Rs Billion)
4,000 2,200
3,000
1,050
2,000
545
1,000 170
718 1,940
296
375 770
0
10th Plan 11th Plan 12th Plan (projected)
Source: White Paper on Indian Railways 2009, Report of the Working Group on Railways (NTDPC), Ministry of Railways.
support (GBS), and market borrowings. Internal by 2.5 times from the 10th Plan (~ Rs 840 billion) to
resources of IR are operated through the DRF, the the 11th Plan (~Rs 2,000 billion), is again projected to
Development Fund (DF) and the Capital Fund (CF). increase by about 2.5 times to reach close to Rs 5,200
billion for the 12th Plan.
The share of different sources of finance has var-
ied significantly over the Plan periods. The share of Further, IR has set an ambitious target for public
GBS started declining from 75 per cent during the 5th private partnerships (PPP) and borrowings through
Plan (1974-78) to a low of 23 per cent during the 8th IRFC, given that the share of GBS remains at the
Plan (1992-97). However, with the beginning of the same level (about 37 per cent); and share of internal
9th Plan in 1997, the trend reversed and share of GBS resource generation is expected to fall from 35 per
started rising and increased from a low of 18 per cent during the last two Plan periods to 20 per cent
cent in 1996-97 to 56 per cent in 2004-05. In this period, in the 12th Plan. As a result the share of extra budget-
internal generation levels were low and reviving the ary resources (borrowings and PPPs) is slated to rise
internal resource generation capability of IR became from 27 per cent in 11th to 43 per cent in the 12th Plan.
a key concern. Figure 1.16 compares the share of dif-
ferent sources of finance during the last two Plan Considering the increasing dependence of IR on
periods (10th and 11th) with the projections of the 12th budgetary support from the government, it may be
Plan period. The Plan expenditure, which increased useful to review the financing framework and fund-
NTDPC | RAILWAYS 21

Box 1.5
China’s Self-Funding Railways: A Sustainable Model for India?
The Chinese railway is the only one in the world of a similar scale to India’s. The government has
increasingly required China’s railways as a whole to be self-funding. The Ministry of Railways (MOR)
is responsible for the railway financing through 18 regional rail administrations. Although MOR is
part of the government, the railway sector is not treated as part of the government budget. China Rail
receives no operating subsidies from the national budget for either train or infrastructure
maintenance, and only modest support for capital investment for new lines to remote areas–less than
5 per cent of current capital funds.
China Rail earns a financial surplus overall; freight transport finances the greater part of China’s
network infrastructure operating, maintenance and capital costs. This is unsurprising as freight con-
stitutes roughly 75 per cent of total traffic-kms and comprises customers with greater capacity to pay
than passengers. The author considers it likely that passenger traffic as a whole more than covers its
train operating expenses and makes a positive financial contribution to network infrastructure costs.
China has not adopted any policy of explicit payments for specific loss-making passenger pub-
lic service obligations. China does not have the kind of suburban or intra-regional service networks
(it actively discourages shorter distance passenger trips) which in many countries constitute the most
loss-making parts of a passenger railway business. Nevertheless, a mixture of more or less profitable
services exists, whether looked at by route or time of day. Different regions also exhibit a range of
financial performance (mainly related to freight density) and MOR reallocates net revenues between
regional rail authorities to ensure financial balance in each.
The Rail Construction Fund Surcharge is an important source of funding for major new con-
struction projects and is possibly unique to China Railways. The surcharge has been imposed on the
basic freight tariffs since 1990 and generates around 16 per cent of revenue. The surcharge revenue is
‘ring-fenced’ by the Ministry of Finance who administers the Fund. It is not subject to tax and can only
be used for major upgrading, new construction and associated debt service. A second, electrification
surcharge, was introduced in 1993 for all freight traffic moving on electrified lines and this revenue is
used for extending electrification over the network.
A joint venture (JV) model was adopted in 2005 which is funded 50:50 by debt from local banks and
equity from MOR and third parties (typically provinces and potential customers). Provincial equity
often comes in the form of cleared land (and associated population resettlement costs). The JV model is
now used for almost all new construction and upgrading projects, though regional rail administrations
continue to operate the train services and question marks remain about how to get the right balance
between railway system co-ordination/integration and protecting the interests of individual JV inves-
tors. China’s MOR also raises debt through loans and bonds (usually short term), mostly through
China’s state-owned banks. The rapid build-up of such debt to finance the development of the High-
Speed Rail network has provoked much comment regarding its sustainability. The burden would be
mitigated if the debt were refinanced over tenures much more appropriate to the long-term nature of
infrastructure provision. It is possible that the sovereign may need to absorb part of the debt directly.
Source: Passenger Railway Institutions and Financing, Paul F. Amos, 5 September 2011.
ing sources in Chinese Railways which require only share for the railways, both in the freight and pas-
modest support from the government (Box 1.5). senger segments, is essential, as also an enunciation
of the strategies to achieve the objective.
INDIAN RAILWAYS: AN ASSESSMENT VISION FOR INDIAN RAILWAYS

OF DEMAND AND GOALS FOR 2032
The Ministry of Railways has set up several expert
In any exercise of transport planning with a time groups in the recent past to formulate a vision for
horizon up to 2032, delineating the role the IR will the Railways. Report of the Expert Group on
have to play, an assessment of the desirable market Railways of 2001 (headed by Dr. Rakesh Mohan), the

White Paper on Indian Railways and ‘Indian Rail- (examples: US. and China), railways’ share is 50 per
ways Vision 2020’ brought out by the Ministry in cent (McKinsey’s study: Building India: Transform-
2009, the recent Report of Sam Pitroda Commit- ing the Nation’s Logistics Infrastructure). RITES in
tee on Modernisation of Railways and the Dr. their Total Transport System Study have estimated
Kakodkar Report on Safety, provide guidance on that the railways’ share in originating tonnage has
strategies to aid transformation of the railways. come down from 89 per cent in 1951 to 30 per cent in
2007-2008; and by assigning transport flows to differ-
In Indian Railways: Vision 2020, the Ministry of ent modes, based purely on total resource costs and
Railways has articulated the following vision: break-even distances derived there from, non-opti-
mal intermodal distribution has cost the economy
‘Indian Railways shall provide efficient, affordable, Rs 385 billion in 2007-2008, constituting 16 per cent of
customer-focused and environmentally sustain- the total transport cost. This is a theoretical exercise
able integrated transportation solutions. It shall be as it implies railways’ increasing its share to 75 per
a vehicle of inclusive growth, connecting regions, cent of the total transport output; further, nearly half
communities, ports and centers of industry, com- of the commodities transported by road are non-bulk
merce, tourism and pilgrimage across the country. in nature, not easily amenable for movement by rail
The reach and access of its services will be continu- without an organised intermodal transport arrange-
ously expanded and improved by its integrated team ment. Notwithstanding this, consistent shift of traf-
of committed, empowered and satisfied employees fic to road is at considerable cost to the economy.
and by use of cutting-edge technology.’
The McKinsey study too has touched upon this extra
It is of the utmost importance that the various strat- cost to the economy in its above study and estimated
egies set forth and the objectives mentioned in the it at 4.3 per cent of the GDP. If the present trajecto-
above documents are pursued with determination ry of modal share continues, the railways’ share in
for a transformational change of IR. An example of freight tonne km may decline to 25 per cent by 2020
resoluteness to improve infrastructure that can be and 20 per cent by 2030. McKinsey estimates the loss
quoted is of NHDP which has brought about a phe- to the nation’s economy at 5 per cent of the GDP by
nomenal improvement in the national highways. 2020. GDP growth at 9 per cent is also at risk.
Any failure to achieve the objectives or any slacken-
ing of the effort will only accelerate the loss in the Similarly, road transport has emerged as the predomi-
IR’s transport share to road, leading to greater pollu- nant mode of passenger transport over the last few
tion and environmental degradation. IR has to make decades. The share of road assessed in passenger km
a bold beginning in this direction, together with the has increased from around 26 per cent in 1951 to 87 per
required organisational changes. cent in 2005 while that of the railways has declined
from 74 per cent to 13 per cent.
An efficient railway transport system, along with
expansion of the network, will bring in collateral The current trend is unsustainable from resource
benefits for the economy through industrial growth cost to the economy. Energy security would become
resulting from an efficient transport infrastructure increasingly important in times to come, as also
and the enhanced demand for steel, wagons, engines, environmental and social considerations, making a
coaches, telecom, signalling, etc. The 12th Plan should positive shift towards rail transport an imperative.
initiate policies that encourage modern manufactur-
ing facilities and innovation in these critical areas. An integrated approach and an enabling policy
framework are required to correct the existing dis-
PLANNING FOR 2032 tortion in favour of road. And it is obvious that IR
will have to be prepared to rise to the challenge. The
If India has to emerge as one of the largest econo- paragraphs that follow deal with desirable market
mies of the world by 2032, railways must play its share for sustainable growth of the economy.
part in facilitating it. To be able to play its right-
ful role and attain the optimal share in the freight Desirable Market Share for sustainable growth
and passenger transport, IR would need to critically of economy
assess the business environment it faces and the
internal capabilities it has. It also has to envision a. Potential for Freight Business
the future and align its resources towards attain- As discussed, RITES, in their Total Transport Sys-
ment of the goals. tem Study, have estimated the total transport output
in 2007-2008 at approximately 1,400 billion NTKMs
Existing scenario of freight and passenger traffic (Table 1.1). Further, the TTSS has also estimated the
total transport output (for select 52 commodities) in
Transport in India is dominated by road; in freight 2007-2008 at approximately 1,200 billion NTKMs, and
tonne-km, it contributes 57 per cent as against 36 per the total transport demand for the year 2025-2026
cent by the railways. In comparably large countries at approximately 5,300 billion NTKMs (for these 52
NTDPC | RAILWAYS 23

Table 1.6
Projections of Total Freight Traffic
[Billion NTKM]
TERMINAL YEAR OF THE PLAN 11TH PLAN 12TH PLAN 13TH PLAN 14TH PLAN 15TH PLAN
PERIOD 2012 2017 2022 2027 2032
GDP Growth Projections 6.9P 8.0E 8.5 E 9.0 E

(Per cent)
Transport Elasticity 1.2
Freight Traffic (Billion NTKM) 2,053E 3,056 4,834 7,856 13,118
Source: NTDPC.
Note:
1. P: Projected in 12th FYP document.
2. E: Estimated (based on NTDPC research).
commodities). This figure has been arrived at by tiously and its service offerings satisfy the increas-
assessing the increased transport demand due to ingly cost-conscious customers who now operate in
growth of 11 commodities that constitute a share a fiercely competitive environment. According to the
of 53 per cent in a basket of a total of 52 commodi- McKinsey study, 65 per cent of the total freight traf-
ties, and then applying the figure so arrived at for all fic is bulk in nature and 75 per cent of the traffic, in
the 52 commodities. The CAGR in percentage terms terms of NTKMs, moves over distance slabs exceed-
comes to 8.5 per cent. If the projection of RITES is ing 400 km. This presents a huge opportunity for rail-
extrapolated to 2032 at the overall growth rate of 8.5 ways to increase their share.
per cent, the size of inter-regional freight movement
comes to about 8,700 billion NTKMs. As mentioned earlier, nearly half of the freight
moved by road is in the non-bulk segment, and a sub-
The above approach is too conservative. A fast-grow- stantial part of it, with a lead of over 500 km. If the
ing Indian economy is expected to be accompanied by objective of a shift to rail is to be achieved, the imper-
a proportionately high demand for transportation. If ative need is for an organised intermodal transport
the country’s GDP grows at an average of 8 per cent system which will combine the advantages of rail
per annum over the 20-year period (2013-2032) and the with that of road. In this context, the need for the
elasticity of total freight traffic-to-GDP is estimated IR to capture a significant share of the fast-growing
at 1.2, the transport growth rate would come to about FMCG, Consumer Durable and Information Technol-
9.7 per cent per annum. At this rate, the total freight ogy (CDIT), containerised cargo and other segments
tonne kilometres would grow by a factor of 6.4, from like automobiles, where its presence is negligible or
about 2,050 billion NTKMs in 2011-12 to more than minimal, is obvious. The 12th Plan has also recom-
13,000 billion NTKMs by 2032 (Table 1.6). mended containerisation as a major strategy to gain
share of the freight market (Box 1.6). Internation-
No attempt has been made for any detailed com- ally also large rail freight providers have redefined
modity-wise projections but the current trends their role beyond just running trains into the larger
and development plans of major freight generating world of multi-modal freight transport and logistics
sectors corroborate the conclusion that transport (Box 1.7).
would continue to grow. Major freight generating
sectors such as power, steel and cement industries Given the realities of cost, economics and customer
and consequently coal, both domestically mined and convenience, as also the modal share in comparable
imported, are poised for a massive expansion. Coal countries (China and the US), the Working Group
constitutes close to 45 per cent of the total railways’ on Railways (for NTDPC) has recommended that
freight movement. Although part of the coal move- the Indian Railways must achieve a market share of
ment may shift to non-rail alternatives (e.g. pit-head 50 per cent by developing a sharper commercial focus.
or port-based power plants relying on merry-go- Table 1.7 provides the estimates for rail freight output
round or conveyor belt systems), concerns on pollu- till 2032.
tion overload and energy security at state/regional
level would lead to continued expansion of thermal In order to attain the desired market share of 50
generation capacity across the country. Both the vol- per cent, railways’ freight traffic has to grow at an
ume and lead of coal transport would increase as a average of 12 per cent over the next 20 years, which
result. A large part of the movement would involve looks challenging given the growth rate of 8 per cent
linkages to new mines or ports. IR can grow very fast achieved in the last six years. A business as usual
in these segments and increase its share provided approach is just not an option as growing at 8 per
network and terminal capacity are built up expedi- cent per annum, while the transport market expands

Box 1.6
Containerisation in Railways
Due to the economic and technological attributes of the railways, it has always been a challenge to
attract consignments which are less than at least a thousand tonnes. Container trains combine the
operational efficiency of unit trains with the commercial flexibility of booking 20 tonnes or even less
at a time. According to the Total Transportation Study (TTS) conducted by RITES for the Planning
Commission, the volume of non-bulk traffic in 2006–07 was 227.17 million tonnes out of the total traffic
of 2386.97 million tonnes.
Indian Railways set up Container Corporation of India (Concor) in 1988 as a public sector company to
spear head containerisation. It commenced operations in 1989 at which stage Indian Railways trans-
ferred all Inland Container Depots (ICDs) and container related business to Concor. From the 7 ICDs
it took over from Indian Railways at inception, Concor has now expanded the network to more than 44
ICDs and 14 domestic and port side terminals and has 213 rakes of flat wagons. Using IR’s network and
haulage, it has pioneered the concept of multi-modalism through its core activities as a carrier of rail
borne container traffic and terminal operation.
Anticipating higher container traffic at Indian ports, Railways liberalised the entry of private players
in the area of rail-based haulage of containers in 2005. The response has been quite good with 15 new
entrants. These 15 new operators have procured 132 rakes and developed 9 new terminals. Sizeable on-
track competition has emerged in some of the exim sectors as well as the domestic sector. Competition
also led to an increase in the growth of rail based intermodal traffic at a rate of 15.5 per cent in the
period 2007–08 till 2011–2012 although there has been a negative growth rate in the domestic sector dur-
ing 2011–12 due to introduction of container class rate for some of the commodities moved normally
by conventional wagons. There is a need to expand containerisation business and improve Railways
share in transport sector. Policies in the 12th Plan will aim at this.
Source: 12th Five Year Plan, Planning Commission, GoI.
Box 1.7
Intermodalism, Multimodalism and Logistics Capability
Larger rail freight providers in the 8 countries (refer table below) have redefined their role beyond just
running trains into the larger world of multi-modal freight transport and logistics. They have done so
not only to better serve their markets but also to avoid becoming disconnected from final markets, and
thereby becoming passive ‘price-takers’ from the ‘middlemen’, including freight forwarders and logis-
tics companies who in many countries are increasingly responsible for overall transport organisation
under contract to ultimate freight shippers or receivers. By engaging more effectively in supply chains
the railways have increased market ‘reach’ without increasing network length.
COUNTRY RAILWAYS AND LOGISTICS

Australia Rail freight operators have had close partnering arrangements with freight forwarders for decades
but since railway restructuring freight companies with wider logistics businesses now run most
interstate freight trains in Australia.
Brazil Many of Brazil’s railways deal with bulk mining and agricultural products but the company with the
largest network (with concessions in Brazil and Argentina) ‘America Latina Logistica’, markets itself
as a full service logistics company.
Canada CN promotes itself as a transportation company that offers integrated services: rail, intermodal,
trucking, freight forwarding, warehousing and distribution. Canadian Pacific stresses ability to plan
and manage logistics solutions and provides one-stop shopping for door-to-door transportation
using long-haul capabilities of the railway and the local market access of trucking, for both rail and
non- rail served customers.
(Contd...)
NTDPC | RAILWAYS 25

COUNTRY RAILWAYS AND LOGISTICS
China China Railway Container Transport Company was established to manage the container business,
including rail and intermodal transport, cargo handling and delivery, the sale and leasing of wagons,
containers and facilities. JV with international investors to establish 18 major intermodal centres
linked by regular container train services.
Germany DB Schenker, the main national rail freight operator, is a multimodal transport company offering
through separate LOB divisions and subsidiaries services in rail freight, land transport, air freight,
ocean freight, contract logistics.
Japan With limited bulk traffic Japan Rail Freight Company has necessarily concentrated on efficient inter-
modal logistics linking 140 container rail terminals with road, sea, and air routes.
Russia Has established subsidiary companies to provide overall logistics services in shipping containers,
domestic container service, automobiles, perishable goods.
United States Many different models but Class 1 railways now typically have overall Logistics Planning capability
offering solutions and management of logistics across modes, as a LOB or as subsidiary or associ-
ated companies.
One early form of integration with other modes was the so-called piggy-back service. After about 1975,
there was substantial growth in the carriage of road truck trailers on rail flat-cars in N.America. The
modest net/tare ratio of such arrangements and the sometimes cumbersome and labour- intensive
loading process inevitably raises the costs of train operations and potential margins are at best thin.
More substantially, maritime freight containerisation over the last 30 years has created a new niche
for railways in an integrated transport market. This is particularly so for ISO containers on routes
between international ports and inland cities but traffic can then take advantage of unbalanced con-
tainer loadings and the availability of the low-cost container liner services. In the last few years’ inter-
modal traffic has overtaken coal as the single biggest generator of revenue in US railways. But the
trailer traffic has declined & container transport, which is more cost-efficient for railways to handle
(even more so with double-stacking) now dominates the intermodal market.
Table 1.7
Projections of Rail Freight Output
[Billion NTKM]
TERMINAL YEAR OF THE PLAN 11TH PLAN 12TH PLAN 13TH PLAN 14TH PLAN 15TH PLAN
PERIOD 2012 2017 2022 2027 2032
GDP Growth Projections 6.9P 8.0E 8.5 E 9.0 E

(Per cent)
Transport Elasticity 1.2
Freight Traffic (Billion NTKM) 2,053E 3,056 4,834 7,856 13,118
Modal share: Rail Freight 35 39 45 50
(per cent) (Assumption)
Rail Freight Output (Billion NTKM) 1,070 1,885 3,535 6,559
CAGR (per cent) - Rail Freight 10 12 13 13
Output
Source: NTDPC.
Note:
1. P: Projected in 12th FYP document.
2. E: Estimated (based on NTDPC research).
at close to 10 per cent, would mean that railways’ accelerate the growth to 14-15 per cent per annum
share would actually decline to less than 24 per cent thereafter to reach 50 per cent market share by
by 2032. Even to retain the existing share of 36 per 2032. This will also be consistent with the proposed
cent, IR has to keep growing at more than 10 per cent capacity creation and augmentation plans, where-
per annum. However, given the severe capacity con- by the two Dedicated Freight Corridors (DFCs) are
straints and various other challenges, a more realis- likely to be operational only after 2017.
tic goal would be to grow at 9-10 per cent till 2022 and

Table 1.8
Passenger Growth for IR
PASSENGER KILOMETRES (IN BILLIONS)

YEAR
SUBURBAN NON-SUBURBAN TOTAL
(PER CENT) (PER CENT)
2011-12A 144 903 1,047

(14) (86)
189 1,320
2016-17 1,509
(12.5) (87.5)
253 2,047
2021-22 2,300
(11) (89)
342 3,254
2026-27 3,596
(9.5) (90.5)
461 5,304
2031-32 5,765
(8) (92)
Source: NTDPC, Report of the Working Group on Railways (NTDPC).

Note:
1. A: Actual (from Railways Yearbook 2011-12)
2. GDP growth projections:
• 12th Plan: 6.9 per cent (projected in 12th FYP document);
• 13th Plan: 8 per cent; 14th Plan: 8.5 per cent; 15th Plan: 9 per cent (NTDPC estimates).
b. Potential for Passenger Business trends may not, therefore, be an accurate guide for
The RITES study did not attempt an assessment projecting the figures for 2032.
of the size of the total passenger transport market
in the country and its intermodal distribution among Over the past 15 years, the elasticity of growth of
the various modes. Reliable information is available passenger kilometres vis-a-vis GDP growth has been
only in respect of rail and air transport, the two 1.1. Using this elasticity and the GDP growth esti-
sectors which maintain statistics on a continuous mates, the passenger traffic (in PKM) is expected to
basis. grow by a factor of 5.5 over the next 20 years. Fur-
ther, the current trends of progressively declining
RITES has also not carried out any optimisation proportion of suburban passengers and the increas-
exercise in respect of passenger transport, as has ing share of upper class and longer lead passengers
been done for freight. There is thus no reference would also need to be taken into account in planning.
base available for determination of an optimal share On the basis of this assumption, projected passenger
for the railways and projection of figures for 2032. growth is shown in Table 1.8.
This approach, that is, ‘optimality consideration’,
may not be relevant as railways’ passenger transport c. Potential for Parcel Business
has long been operating under manifest supply con- Parcel traffic, mostly transported along with passen-
straints. There is also an imbalance in the passenger ger services, presently forms an insignificant pro-
mix in that a preponderant proportion of passengers portion of about 2 per cent of the non-bulk traffic of
carried by IR are of short lead in nature, which per- the country. As per the data for 2011-12, IR transport-
haps could be better served by road. ed approximately 7 million tonnes of parcels, gener-
ating revenue of about Rs 16 billion. Parcel business
Urban population constituted 30 per cent of the total is at present a loss-making activity for IR.
population in 2010; this is projected to grow to 40
per cent by 2030 (India Urbanisation Econometric The potential, however, is large. As mentioned earlier,
Model, McKinsey Global Institute). India’s econom- CRISIL Infrastructure Advisory study has assessed
ic growth rate also presents a potential for higher the total movement by road of 22 commodities, out
demand for transportation; rapid urbanisation and of a basket of 52 commodities, carried as per the data
the on-going structural transformation of the Indian for 2009-10, at about 400 million tonnes. These 22 com-
economy would give rise to increased demand for modities are easily amenable for movement by rail
travel. Extensive use of information technology for as parcels for distances of 500 km and over.
ticketing, reservation and overall improved conveni-
ence of passengers in recent years also presents an If the modal share of the railways has to improve,
opportunity for the growth in passenger travel. Past a shift of long distance (500 km and above) trans-
NTDPC | RAILWAYS 27

port of parcels essentially non-bulk packaged items • Development of 15 to 20 logistics parks as
to rail is a must. It needs no reiteration that the IR the main network hubs viz. Mumbai Bengal-
has a major share of bulk movement and the need is uru, Cochin, Hyderabad, Kolkata, Delhi NCR,
for an ever-increasing market share of the non-bulk Ahmedabad, Nagpur, Vishakhapatnam and
commodities. Siliguri, etc. IR must work in partnership
(in a joint venture) with state and city
The above would, however, need a market oriented authorities to set up rail-based multi-modal
strategy, with focus on total logistics support, value logistics parks to attract increasing volumes
added services, rational cost and value based tariff, of miscellaneous cargo to rail.
state-of-the-art IT applications for providing real- • Upgrade rail wagons (higher axle load, better
time online access to information on movement of tare to payload by shifting away from carbon
consignments and adequate and appropriate rolling steel to stainless steel and aluminium/other
stock and public private participation in terminal light-weight bodies, increased payload of cov-
operation and road bridging. Dedicated parcel ter- ered wagons (BCN) through use of well wag-
minals with mechanised handling facilities, specifi- ons, better maintenance cycles, etc).
cally targeted at agricultural produce, automobiles, • Upgrade wagons and track to 25 tonnes axle
other industrial products and general parcels and load.
a focused business organisation that would concen- • Improved infrastructure and rolling stock
trate on marketing, sales and transport of parcel maintenance.
services within an agreed transit time through time- • Running of freight trains at 100 km per hour.
tabled trains and parcel specials form an essential • Running of premium freight services with dif-
feature of the strategy. ferential pricing and assured deliveries.
• Supply of rakes on demand with differential
Indian Railways Vision 2020 recognises the above and pricing for different demand lead times.
has set a target of revenue of Rs 80 billion by 2019-2020. • Running of trains on schedule with guaran-
However, this segment being small on the whole can- teed transit time.
not be the mainstay of freight traffic volumes. • Development of a few selected corridors for
heavy-haul operations.
SERVICE DELIVERY AND CUSTOMER • Running of automobile, hazardous material
ORIENTATION trains, movement of bulk cement, etc by pri-
vate train operators.
IR must provide services to meet customers’ require- • Reduction in cargo parcel size to 1,000 tonnes
ments and expectations. It has to devise solutions that and aggregation mechanism for even smaller
anticipate and meet customers’ needs in different parcel-sizes.
segments. In the freight service, bulk and non-bulk
commodities would demand different approaches. B. PASSENGER SERVICES
In passenger services, premium and non-premium Quality of services in terms of punctuality, safety,
passengers, and suburban and intercity passengers security, sanitation, and other value-added services
would similarly demand different approaches. needs to be upgraded. Access to railway services
needs to be improved using existing and innovative
The goal for service delivery should provide for the networks of distribution channels like Internet,
following: mobile telephones and other vending mechanism.
Speed of trains should be enhanced on segregated
A. FREIGHT BUSINESS passenger routes. The strategy for passenger busi-
The goal for freight business is to have segregated ness will include:
freight corridors, improving the speed of transit and • Augmentation of supply (more trains and
cost-efficiencies in bulk transport. The strategy for longer trains) to ensure full satisfaction of
freight business should also specifically provide for: demand.
• Shift of focus to long-distance and inter-city
• Construction of six Dedicated Freight transport and suburban corridors involving
Corridors. dense passenger movements.
• Setting up of a focused business organi- • Upgrade speed to 160-200 kmph on selected
sation for multimodal transport of non- corridors.
bulk commodities (e.g. parcels) under the PPP • Redevelopment of stations for smooth flow and
mode, combining the efficiency and advantag- comfortable experience of passengers as also to
es of rail and road. ensure clean and hygienic environment.
• Improved connectivity to industry clusters • Redesign of coaches to enhance travel comfort.
as well as significant ports (major and non- • Conversion of all stopping passenger trains
major), based on their current and projected to EMUs/DMUs or railcars; invitation to state
traffic volumes. Development of last-mile con- governments to manage uneconomic and
nectivity should be encouraged through PPPs. unpatronised services.

Box 1.8
A Competitive Freight Market
Indian Railways’ freight services are moving from a captive to a competitive market. In order that the
freight segment grows to its full potential, reliance on marketing alone will certainly not suffice. Even
marketing in combination with innovating pricing solutions will not be adequate. The target customer
and traffic stream needs to be considered at the stage of designing the scope of projects and determin-
ing the investment.
Developing a strategy for the bulk/non-bulk freight business:

Railways have traditionally focused on the bulk long haul traffic. With the increasing growth rates of
the non-bulk segment, there is need to address the long haul non-bulk segment. This would involve
developing multi-modal transportation solutions with road and other private industry participation.
A detailed assessment of the bulk and non-bulk transport opportunities available for the Railways as
also the organisational imperatives that need to be addressed to increase customer focus and respon-
siveness would be a critical step towards developing a profitably growing freight business.
The non-bulk and manufactured goods are high value traffic that can bear higher freight rates and
yield higher profit. To improve the mix of goods as well as earn higher revenues and higher profits,
it is necessary that Railways devise cost effective and efficient services, pricing structures and opera-
tional strategies to cater to this traffic. Railways must adopt the principle of logistics and supply chain
management that offer total transportation solutions to the customers. For this purpose, it must move
towards integration and partnership with complementary entities in other modes of transport and
promote multi-modal transport systems.
The key imperatives and challenges to develop a cohesive strategy for the freight business would be
to involve freight customers in the exercise and to gear the organisation for improved customer focus.
Source: The Indian Railways Report 2001: Expert Group on Indian Railways.
• Development of select High Speed Rail (HSR) tions for both, the existing traffic streams and capac-
corridors (speed of 350 kmph), if and when ity needed to cater to new traffic streams. An analy-
deemed to be economically viable. sis done by Long Range Decision Support Systems
(LRDSS) of Ministry of Railways indicates that most
of the traffic growth would come along the existing
INVESTMENT REQUIREMENTS AND Golden Quadrilateral and Diagonals. This is also
FINANCING PLAN reinforced by the McKinsey report. Further, invest-
ments needed to modernise the railway system and
INVESTMENT REQUIREMENTS9 ensure a zero-accident and fully reliable systems
need to be ensured.
The previous section sets out the following broad
goals for IR for 2032: An investment plan for 20 years clearly articulating
• Achieve 50 per cent share in freight transport; the goals and fully backed by a funding plan is need-
and ed. The following sections discuss the investment
• Meet the passenger service demand in full. needs9 (tentative) over a time-horizon of 2012 to 2032,
spanning four Five Year Plans (12th to 15th). The broad
However, while the potential to grow in both freight heads for investments are as follows:
and passenger traffic segments is immense, without
adequate capacity all efforts to capture traffic would • Capacity Augmentation (including safety
come to naught. Therefore, capacity creation is the works)
single biggest challenge confronting IR in the next • Rolling Stock
few years. It is of the utmost importance that a vision • Stations & Terminals, Technological upgrade
similar to that of NHDP is laid down for the railways and modernisation
now so that we may expect a transformed network
by 2032. CAPACITY AUGMENTATION
Plans for capacity creation must encompass both Any serious effort at capacity augmentation must
infrastructure and rolling stock and cater to projec- first and foremost focus on decongestion of congest-
9. The investment needs have been estimated assuming that IR attains a freight share of 50 per cent by the year 2032 with high GDP growth rate (about 9 per cent).
NTDPC | RAILWAYS 29

Box 1.9
Dedicated Freight Corridors (DFCs): A Game Changer for the Indian Rail Sector
The Dedicated Freight Corridors on the Western and the Eastern routes is a strategic capacity aug-
mentation initiative taken by Railways and involves construction of 3,338 kms of dedicated freight
lines to carry predominantly coal and steel on the Eastern corridor and containers on the Western cor-
ridor. The ports in the Western region covering Maharashtra and Gujarat would be efficiently linked
to the Northern hinterland and similarly on the Eastern side, coal would move to the power plants
in the North. The Project completion cost is estimated at Rs 959 billion. A major part of the project
is being financed through multilateral/bilateral debt. World Bank funding of part of Eastern DFC is
estimated at US $2.73 billion (Rs 136 billion) and Japan International Cooperation Agency (JICA) fund-
ing of 504 billion Yen (Rs 315 billion). Dankuni–Sonnagar section of Eastern DFC (Rs 100 billion) is to
be implemented through PPP. The balance requirement would need to be met through Budgetary Sup-
port. Both Eastern and Western DFCs are targeted for completion in the terminal year of the 12th Plan.
Dedicated Freight Corridor can be justifiably called an innovation in rail transport in India because
of a number of reasons. The average speed of freight trains will go up from 25 kmph to 70 kmph which
will reduce the transit time by less than half from the present levels.
Railway technology would get a major up-gradation with the help of heavy hauled freight trains of
15,000 tonnes capacity and 1500 metres length. The axle loads of DFC routes will also go up from 25
tonnes to 32.5 tonnes which would enhance the track loading capacity from 8.67 tonnes per metre to 12
tonnes per metre. Wagons with much better pay load to tare ratio would also get introduced through
this technology. Newer technology in signaling, train communication, track-maintenance and opera-
tions would get introduced in the Indian Railways system. The capacity released by freight trains can
be used for running more passenger trains at higher speeds after upgrading the existing mixed cor-
ridors of Indian Railways.
In addition, this initiative is expected to offer significant reduction of Greenhouse Gas (GHG) emis-
sions in transport sector of India.
Pre-feasibility studies have also been completed on the four new Freight Corridors, vis. North-South,
East-West, East-South and Southern corridors and Preliminary Engineering cum Traffic Survey
(PETs) is being undertaken by RITES. Based on the outcome of the PETS a beginning would be made
in the Twelfth Plan in implementation of the new corridors in a phased manner.
Source: 12th Five Year Plan, Volume II, Planning Commission, GoI.
ed routes and segregation of freight and passenger • South DFC (Chennai –Goa) 902km; and
traffic on the most heavily trafficked routes. This • North South DFC (Delhi-Chennai) 2,190 km.
can be achieved by:
• Construction of Dedicated Freight Corridors Of these the first two are already under construction
(DFCs) on the busy high density network (expected to be commissioned by March 2017), and
such as Delhi-Mumbai, Delhi-Kolkata, Delhi- for the others pre-feasibility studies have been car-
Chennai, Kolkata-Mumbai, Chennai-Goa and ried out. It is suggested that private sector participa-
Kolkata-Chennai routes, with specifications tion should be encouraged by IR for development and
that enable high traffic and heavy-haul freight operations of the DFCs.
operations; and
• Construction of third and fourth lines on oth- Quadrupling (non-DFC lines) and fifth and sixth
er saturated routes. Lines: In addition to the DFCs, a number of other
saturated stretches (approximately 14,500 km) would
Six DFCs totalling 9,538 km that would be needed also need third and fourth lines. Lines approaching
are: major metropolises would also require additional
• Western DFC (Delhi-Mumbai) 1,534 km; fifth and sixth lines to effectively segregate commut-
• Eastern DFC (Ludhiana-Kolkata) 1,839 km; er lines from non-commuter lines.
• East West DFC (Howrah-Mumbai) 1,976 km;
• East-Coast DFC (Kharagpur-Vijaywada) Doubling and Gauge conversion: Similarly,
1,097 km; around 24,000 km of single lines facing congestion

Table 1.9
Summary of Lessons Offered by International Experiences of HSR Projects
SUMMARY OF LESSONS
Motivation HSR has to be devoted to solving congestion in corridors between large populated cities. Political
or administrative objectives and extension of lines for regional equity and development lead to the
economic failure of the project.
Design and Functions The international experience shows that passenger-oriented HSR has a minimum economic impact
on the territory served. Lower construction costs are associated with combining HSR and con-
ventional rail. Routes have to be established according to demand (commercial basis). Adequate
multimodal connections are needed.
Economic Cost The development of an HSR network entails huge construction and operation costs (especially
important land expropriation cost, bridges, and tunnels). The key decision that affects cost concerns
complementarities (passenger/freight) and the extent of combination with existing conventional rail.
Political pressures (connection and station costs) can increase HSR cost and constrain its profitabil-
ity because of opportunism or private interests from both politicians and bureaucrats.
Mobility Impacts Provide significant travel time savings when compared to conventional rail services, but similar door-
to-door timings are reported for air transportation on routes of around 400 miles. Modal distribution
of traffic is affected when HST starts operation, with the greatest impact on the airline industry.
Environmental Cost Energy consumption and carbon dioxide emissions are lower for HST than for air transportation.
However, they are also greater for HST than for conventional rail per seat mile. In fact, it is necessary
to wait more than three decades to compensate energy and pollution generated during construction.
Economic and Regional Effects HSR does not generate any new activities, nor does it attract new firms and investment, but rather
it helps to consolidate and promote ongoing processes as well as to facilitate intraorganisational
journeys, for which mobility is essential. For regions and cities whose economic conditions compare
unfavorably with those of their neighbors, a connection to the HSR may even result in economic ac-
tivities being drained away and an overall negative impact. Medium-sized cities may suffer the most
because of the centralisation of activities in large nodes. Tourism and the services sector are the only
activities favored, while no effects are reported for industrial and agricultural activities.
Source: HSR: Lessons for Policy Makers from Experiences Abroad, Public Administration Review, June 2012.
to the new freight corridors. This would present an map of the suggested routes for increasing the maxi-
opportunity to increase the maximum permissible mum permissible speed to 160-200 kmph.
speed of passenger trains on the existing corridors
to 160-200 kmph (at present the maximum permissi- Thus, given the substantial funding required from gov-
ble speed for passenger trains on IR is 150 kmph for ernment to implement HSR projects, a programme for
a few trains and the average commercial speed is in raising speed to 160-200 kmph on selected existing routes
the range of 70 kmph). This would, in turn, enable should be undertaken till the time the HSR projects are
operation of overnight inter-city services in the dis- found commercially justified or operationally required
tance range of 1,000-1,500 km, as also help connect to cater to the country’s growth and mobility needs.
cities within distance of 500-700 km with high-speed
day services. Summary of Capacity Augmentation: Figure
1.17 shows the summary of investments required
Increasing speeds to 160-200 kmph would need inputs for capacity augmentation by 2032. The total cost for
by way of removal of speed restrictions, yard remod- various capacity augmentation initiatives discussed
elling, fencing, improved signalling, easing of sharp above is close to Rs 12,500 billion, excluding the
curves etc; the most opportune time would be to investments on new lines and HSR (the investment
commence the exercise and implement the scheme requirement increases to Rs 18,200 billion including
when any section of the Dedicated Freight Corridor these initiatives).
gets commissioned, relieving the pressure of operat-
ing freight trains on an existing congested section. ROLLING STOCK
The aim can be to successively increase the average
speed in phases, reaching 120 kmph ultimately. The Along with the envisaged investments in capacity
end result is shown in Table 1.10. These services augmentation, there would be a huge requirement
would be able to satisfy the requirement of high of rolling stock, both for replacement combined with
speed travel in a large measure. Annex 1.2 shows a technological upgrade and increased needs of traf-
fic, if IR has to achieve the goals set for freight and

Box 1.10
High Speed Rail in Indian Context
High-speed rail (HSR) is defined as a distinct category of passenger rail transport system that nor-
mally operates with separate track and rolling stock at speeds faster than 250 kmph. It uses a different
level of rail technology and management principle that positions it at an unbeatable advantage vis-a-
vis other modes like cars and air-planes in the distance range of 500-1000 kilometres.
HSR has emerged as a fast and efficient transportation system for medium-distance travel of up to
1000 km. Some of the main reasons for introduction of HSR internationally are need for generation of
additional capacity on the conventional network; regaining share from airlines and road; and energy
security and environmental concerns. HSR network has various benefits such as lower energy con-
sumption, lesser land usage for a given capacity compared to motorways, decongestion of metro cities,
significant savings in journey time etc.
However, HSR networks world over require continuous fiscal support due to high costs of
construction and rolling stock. It is estimated that an annual ridership of at least 20 million pas-
sengers are required just to cover the working expenses and interest costs and probably double that
number to have any possibility of recovering the capital cost. In India, the cost of construction of a
high-speed double line rail corridor between Pune-Mumbai-Ahmedabad has been estimated at Rs 630
billion (excluding rolling stock) for 640 kms i.e. around Rs 800 million per km. In comparison, cost of
the construction for DFC is estimated to be Rs 250 million per km.
Table 1.10
Possible Savings in Travel Time with Speed Raising on Suggested Routes
CURRENT PROPOSED TIME SAVING
ORIGIN DESTINATION DISTANCE (KMS) DURATION (HOURS) DURATION (HOURS) (HOURS)
Delhi Ahmedabad 934 13.5 8.0 5.5
Delhi Mumbai 1,384 16 11.5 4.5
Delhi Allahabad 634 7.5 5.5 2.0
Delhi Kolkata 1,453 16.5 12.0 4.5
Delhi Chennai 2,176 28.5 18.0 10.5
Mumbai Ahmedabad 491 6 4.0 2.0
Mumbai Kolkata 1,968 26.5 16.5 10.0
Source: NTDPC.
Note:
1. Current duration has been calculated based on scheduled departure and arrival timings of Duronto or Rajdhani trains between the origin and destination.
2. Proposed duration has been calculated assuming an average speed of 120 kmph, post commissioning of DFC and upgradation of speeds on the identified corridors.
passenger transport. Figure 1.18 provides the rolling locomotives envisaged. The investment required for
stock requirement on the basis of the projections dis- rolling stock is estimated to be close to Rs 15,000 bil-
cussed earlier (Table 1.7). The rolling stock require- lion. In addition to the above, upgrade of Production
ment has been worked out by taking into account Units (PUs) and Workshops for maintenance of the
100 per cent improvement in utilisation of freight rolling stock would also require investment to the
wagons, 50 per cent improvement in efficiency uti- tune of Rs 750 billion.
lisation of freight locomotives, 20 per cent improve-
ment in utilisation of passenger locomotives and The Committee is of the view that given the massive
the replacement requirements. These improvements investment requirement for rolling stock, IR should
may appear to be too high, but would need to be aimed encourage participation of private players (both
at and realised given the scale of investment in track domestic and international) in setting up manufac-
capacity, zero-accident/failure and high-horse power turing facilities for rolling stock and components.
NTDPC | RAILWAYS 33

Figure 1.17
Investment Requirement for Capacity Augmentation Needed by 2032
Mandatory Discretionary
4,000
Costs (Rs Billion)
250 1,500
2,500
700
12
480 1,000
18,152
2,400 12,652
30
2,900
2,380
Cs
ng
s)
ks
ks
s*
p)
es
PC
ne
or
io
tio
lin
se
ne
ou
or
or
isi
DF
lin
rs
id
Li
TD
ub
ca
as
yW
Li
Gr
Ra
6 th
ve
rr
C
Do
ifi
-p
l (N
w
ty
Co
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ng
on
et
tr
Ne
By
&
ili
ee
ki
ta
eC
5 th
ed
ec
af
n-
ac
or
40
Sp
To
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El
pe
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ug
l (W
s(
he
g(
-s
Ga
affi
se
gh
in
ta
Ot
as
pl
Tr
Hi
To
ru
-p
ad
By
Qu
Source: Report of the Working Group on Railways (NTDPC), NTDPC.

Note: Investment for new lines includes - (a) 132 projects already sanctioned and under implementation (11,200 km to be constructed out of 14,200 km); (b) new lines for
economic development serving the industry estimated at 200 km p.a. for 20 years (these include international corridors and port connectivity works).
This would facilitate induction of world-class tech- outgoing passengers, seamless connectivity with
nology, besides being a source of capital for the the surrounding city, ample parking space, comfort-
resource constrained IR. As a first step, IR should able concourse areas and platforms, etc. Further,
corporatise its existing PUs/workshops. This aspect modern coaching maintenance terminals capable
has been discussed in detail in the section on Organi- of ensuring quick maintenance and washing of
sational Reforms. train-rakes with utmost safety and cleanliness will
also be needed.
STATIONS AND TERMINALS
While investment for redevelopment of stations
Indian Railways’ operations require efficient termi- (roughly Rs 1,000 billion) and development of freight
nals to make any impact in the transport market. At terminals (roughly Rs 500 billion) could be mobilised
present, most of the freight transport is carried out through private sector participation, investment in
in customer-owned private sidings. These are basi- coaching terminals (around Rs 500 billion) would
cally meant for exclusive use of major customers. have to be publicly funded.
There are roughly 1,300 goods sheds owned and man-
aged by the Railways. Of these, around 500 handle TECHNOLOGICAL UPGRADATION
more than 10 rakes per month. IR needs to augment
some of its good sheds to handle at least one rake per In order to match the best of the railways in terms of
day with planned investment in lighting, circulat- technology and safety standards, investment would
ing area, approach roads and facilities for custom- be required for upgrade of assets (track and bridges
ers. Moreover, the private sector should be encour- for better loading standards, relocation of structures
aged to come forward and build efficient terminals, to permit larger moving dimensions, signal and tel-
equipped with related logistics services like ware- ecom, etc.), information technology and research &
housing and inter-modal transfers, etc. development. Given the prevailing security environ-
ment in India, investment would also be needed in
Similarly, major passenger stations catering to more beefing up security at stations, in trains and other
than one lakh passengers a day must be upgraded. railway installations. It is estimated that all these
This would require segregation of incoming and

Figure 1.18
Rolling Stock: Estimated Investment Requirement; Current Holding and
Incremental Requirement
(IN NUMBERS)
(RS BILLION) CURRENT INCREMENTAL

HOLDING REQUIREMENT*
Freight Wagons 220,000 1,100,000
Electric Locomotives 3,849 28,000
Diesel Locomotives 5,000 15,000
EMUs/MEMUs 6,694 30,000
Coaches 50,000 210,000
Upgradation of Nil Nil

PUs/Workshop * Including replacement
works may add up to about Rs 4,000 billion over the gested that IR should achieve physical separation
next 20 years. of the long-distance network and the suburban
network. The segregation of suburban and long-
SUBURBAN TRANSPORT distance passenger/freight traffic is necessary for
efficient provision of commuter service. A sepa-
Indian Railway’s network running through the rate organisation should be created for suburban
country’s fast-growing urban agglomerations, services with freedom to coordinate with state gov-
including major state capitals, already carries sig- ernments for connectivity/integration (Box 1.11).
nificant volumes of commuter traffic. In cities like Modern accounting practices would ensure that
Mumbai and Kolkata (and to some extent, Chennai), infrastructure and rolling-stock resources used
IR’s commuter network constitutes the lifeline of by these lines of business can be properly costed
suburban transport. As per central government pol- and charged for. MRVC in Mumbai and MMTS in
icy, urban mass transport is now under the purview Hyderabad are two successful models of financial
of state governments and Ministry of Urban Devel- participation and cooperation with state govern-
opment. However, the existing suburban services ments. Other states need to be engaged for similar
on IR would continue to meet passenger demand. Its initiatives. Viable cost-sharing arrangements need
role will continue to be relevant despite the advent to be created for both infrastructure and rolling
of metro rail networks that have started altering stock investment and management of commuter
the urban transport landscape in several cities. operations.
From the railways’ standpoint, the foremost con- It is envisaged that over the next 20 years, IR’s share
cern stems from the operational losses suffered of expenditure (@ 50 per cent) in augmentation of
on these services, in addition to the capacity con- suburban networks would amount to roughly Rs 600
straints. These services are loss-making and have billion (Rs 30 billion per annum). In addition, two
become a bottleneck for running of long-distance elevated rail corridors using the existing right of
trains and freight trains on the same tracks. They way of railways in both Western and Central Rail-
contribute roughly 53 per cent in number of passen- ways in Mumbai (Churchgate-Virar and Mumbai
gers over the IR’s total passenger traffic; however, VT to Karzat) costing approximately Rs 400 billion
their earning share is only 7 per cent (2010-11). could be implemented through PPP along with Via-
bility Gap Funding (VGF). Similar other projects
Railway networks in urban areas were primarily in Mumbai and other cities will come up in future.
built for long-distance inter-city transport. It is sug- Overall, it is estimated that an investment of the
NTDPC | RAILWAYS 35

Box 1.11
Separation of Suburban Services from Other Train Services
Suburban services could be separated from other train services. The sequencing of actions could be
separation of accounting, followed by organisational separation creating suburban entities, followed
by partnership with state government and private sector in SPV. Such SPV should also have the man-
date for modernisation and upgradation of services at the request of state government.
State Governments should agree to finance on the basis of Peak Cash Deficit Funding by the Indian
Railways similar to the funding of Phase II of the rail component of the MUTP being implemented
through MRVC. SPV should enter into an agreement with IR for gradually reducing the operating
losses reaching zero within a time frame of 5-10 years. SPV should be allowed to develop alternative
sources of revenues through advertising rights, leasing of spaces to service providers etc. IR should
get better track availability for its long distance passenger and freight trains after such upgradation.
Source: Report of the Working Group on Railway Programmes for the 11th Five Year Plan.
order of Rs 1,000 billion would be required for sub- more investment purely from the view point of satis-
urban transport over the next 20 years. fying demand for freight and passenger traffic at the
improved service level.
SUMMARY OF INVESTMENTS REQUIRED AND PRIORITISATION OF INVESTMENTS IN RAIL NETWORK

PHASING OF FUNDING Given the massive investment requirements for
development of the railway network, it is essential
Figure 1.19 provides a summary of the investment that priority is given for development of projects/
required over the next 20 years (2012 to 2032) along routes that can quickly ease the capacity constraints
with its phasing over the corresponding Five Year or improve the operations and that have the highest
Plan periods. The total investment required over the impact. Further, given the high share of bulk com-
20-year period is estimated to be around Rs 35,000 modities in India’s freight traffic14, it is suggested
billion11. It is envisaged that bulk of the funding and that investments in railways be prioritised as fol-
project execution will take place during the 13th and lows:
14th Five Year Plan periods (between 2017 and 2027).
By the 15th Plan Period (2027-2032) most of the net- • Prioritisation of Dedicated Freight Corri-
work capacity and modernisation works would have dors (DFCs): As discussed in the Chapter 8 on
been completed and the spending would, therefore, Transportation of Energy Commodities, the
slow down in the final five years. Eastern DFC is likely to carry an overwhelm-
ing share of the long distance coal traffic, with
The bottom-up assessment of the investment its share increasing from about half currently
required has been crosschecked from a macroeco- to about two-thirds by 2031-32. Therefore, the
nomic perspective. In 2009-10, investment in IR was Eastern DFC must be given the highest
0.6 per cent of GDP. It is considered essential that priority among the DFCs, and should be
the investment in railway infrastructure is ramped completed within the 12th Five Year Plan.
up to reach at least a level of 1.3 per cent of GDP by
2030 and stay at that level till 203212. Following this The Western DFC will carry imported coal
approach would imply that approximately Rs 58,000 and container traffic mostly from Gujarat to
billion would need to be invested in railways during the northern and north-western states, and is
the period 2012-13 - 2031-32, i.e. Rs 2,900 billion per already slated for completion by the end of the
annum on an average over the next 20 years13. The 12th Plan. However, because it is not as impor-
gap is explained by the fact that the Committee has tant for movement of bulk materials, we sug-
been conservative on certain investment-intensive gest that about 80 per cent of the investment
projects like HSR. Further, the Committee feels be done in the 12th Plan and the remaining 20
that once growth-inducing investments are made, per cent in the 13th Plan. The East-West, East-
enhanced efficiencies could bring down the need for Coast and North-South DFCs will carry about
11. Rs 40,500 billion if investment in HSR and new lines is included.
12. In the year 2001, investment in Chinese Railways by the Government of Republic of China represented 0.8 per cent of the GDP. In the year 2009, this figure stands at
approximately 1.7 per cent of GDP.
13. This is based on the assessment of GDP growth @ 9 per cent made by the NTDPC secretariat.
14. 65 per cent of the total freight traffic is bulk in nature and 75 per cent of the traffic, in terms of NTKMs, moves over distance slabs exceeding 400 km (McKinsey: Building
India: Transforming the nation’s Logistics Infrastructure, 2010).

Figure 1.19
Investment Required by 2032 and Phasing of Funding
Investment Requirement Phasing of Funding
(2012 to 2032)
1,000
4,000
5,190
500 500
1,000
9,177
Rs Billion
15,650
35,300
12,037
12,650
8,896
n
ck
n
tio
tio
1)
2)
al
P
o
or
al
FY
FY
FY
FY
s(
t
n(
St
ta
ta
To
in
sp
al
io
h
en
ss
12 t
13 t
14 t
15 t
ng
in
an
at
m
er
ay
lli
Tr
ug
tT
Ro
ra
er
lw
an
yA
fT
pg
gh
ai
rb
fR
ei
yU
cit
to
bu
Fr
to
pa
en
og
Su
en
Ca
ol
op
hn
m
op
c
ve
Te
vl
De
de
Re
Terminal
Source: Report of the Working Group on Railways (NTDPC); NTDPC.

Notes: 1. Development of coaching maintenance terminals.
2. Technological upgrade and modernisation (tracks, bridges, Signal & Telecom, Information Technology, Research & Development and other miscellaneous works).
the same amount of coal as each other but Another reason for focusing on the eastern
much less than the Eastern DFC and should end of the DFCs is that transport of coal with-
be completed by the end of the 13th Plan. The in coal-producing states and to neighbouring
Southern DFC, which is not important for states is likely to use sections of DFCs that
movement of bulk commodities and is expect- are short but the volume of traffic is likely to
ed to carry almost no coal, can be completed be high. Almost all the use of short sections
by the end of the 15th Plan. of DFCs will occur in the eastern part of the
country.
• Construction of Eastern, East-West and
East Coast DFCs must start from the east- • Critical Feeder Routes at Mines (coal, iron
ern end: The traffic on these three DFCs will ore): Feeder routes that will carry coal and
be highest closest to the coal-fields and will iron ore from mines to the trunk routes are
decrease as coal is unloaded at successive states critical to ensure that power generation and
on the route to the furthest state. For example, steel production keep up with the economy’s
the eastern end of the Eastern DFC is likely to requirements. However, eight critical feeder
carry coal destined for several states: Bihar, routes for coal with a combined length of
Uttar Pradesh, Delhi, Haryana and Punjab, but about 600 km and several other critical links
by the time it gets to the western part of the for the steel industry with a combined length
country, it will be carrying coal only for Hary- of about 2,340 km are awaiting completion (See
ana and Punjab, the rest of the coal having Chapter 8 on ‘Transportation of Energy Com-
been unloaded en-route in Bihar, UP and Delhi. modities’ for a detailed list of these routes).
The total cost of these routes will be about Rs
This importance of the eastern end would also 35 billion for coal routes and Rs 117 billion for
apply to the other DFCs for similar reasons. steel routes (under 3 per cent of the Railways
NTDPC | RAILWAYS 37

Figure 1.20
Funding Sources
[Investment in Rs Billion at 2011-12 prices]
Financing of Projected Investment (Rs Billion)
15TH Plan 1,069 7,119 712 8,900
14TH Plan 4,790 3,551 2,330 1,369 12,040
13TH Plan 4,052 1,506 1,597 2,026 9,181
12TH Plan 1,940 1,050 1,200 1,000 5,190
0 6,750 13,500
Gross Budgetary Support Internal Generation Extra Budgetary Resources Private Sector
Source: Report of the Working Group on Railways, NTDPC (2012).
budget for the 12th Plan); but with large benefits must be coordinated with investments being
for the economy. These critical routes must be planned in the power sector, and decisions
completed on the highest priority within the 12th for the corresponding transport investment
Plan. should be taken simultaneously.
• Feeder routes to Power Plants within Coal RESOURCE MOBILISATION AND SOURCES
Producing States: In-state consumption of OF FUNDING
coal for power is likely to increase and much
of this new capacity will come up in clusters As discussed earlier, railways’ Plan expenditure is
of about 3,000-4,000 MW each. Accordingly financed through a combination of internal genera-
feeder routes from the mines to the power tion; money from the general exchequer extended as
plants will need to be provided. We estimate gross budgetary support (GBS), and market borrow-
that such links will be about 70-100 km long ings. Although it is difficult to determine the pre-
and will be required to carry about 20 mtpa cise mix of funding sources over the next 20 years,
each. Consumption of domestic coal within the projections for resource mobilisation have been
coal-producing states is expected to grow at worked out on the basis of investment requirement
about 24 mt per year in the country. Therefore, of Rs 35,000 billion. In order to meet the massive
roughly one such feeder route to a cluster of investment requirement, public investment would
power plants will be required every year in have to play a significant role in creating the neces-
the tri-state region of Odisha, Jharkhand and sary capacity for growth in the initial 10 years, sup-
Chhattisgarh. plemented by borrowings (within prudent limits)
and implementation of select projects through PPPs.
These links should be designed for heavy
haul technology where a rake per day carries Figures 1.20 and 1.21 show the estimated contribu-
4 Mtpa. It is likely that some of these feeder tion of different sources over the next 20 years. The
routes may overlap to some extent, with each proposed funding plan relies heavily on budgetary
other or the feeder routes that bring coal from resources in the initial period. Internal generation
the mine to the trunk route. Because each is expected to pick up and contribute an overwhelm-
such feeder route will take a minimum of six ingly large share in later periods. The share of inter-
years to complete, planning for these routes nal generation rises from about 20 per cent in the 12th

Figure 1.21
Funding Sources
[Per cent share]
Gross Budgetary Support Internal Generation Extra Budgetary Resources Private Sector
15TH Plan 12 80 8
14TH Plan 40 29 19 11
13TH Plan 44 16 17 22
12TH Plan 37 20 23 19
0 20 40 60 80 100
Plan to 80 per cent by the 15th Plan. The share of GBS Needless to say, attainment of the ambitious growth
is expected to be in the range of 40 per cent till the is dependent on necessary investment in capacity
14th Plan and falls to about 12 per cent in the 15th Plan. augmentation and enhancement and modernisation
Box 1.12 lists the major assumptions based on which of the network. IR’s ability to implement this pro-
the projections for mobilisation of internal resourc- gramme would be a critical determinant in achiev-
es have been worked out. ing these projections.
IR aims at mobilising over Rs 5,000 billion through

private sector participation (PSP) during the 20-year MAJOR ISSUES CONFRONTING
period. PSP/PPP programmes may start with a few RAILWAYS
identified projects where quick wins are scored and
then scaled up further. PPP mode may be tried for pro- In order to meet the ambitious goals set for 2032, it
jects such as segments of dedicated freight corridors, is essential to identify and address the major issues
elevated rail corridor in Mumbai, last-mile connectiv- being faced by the IR. The following paragraphs dis-
ity, high speed rail corridors, rolling stock and other cuss the major issues confronting the network, clas-
service provisions, etc. PPPs and partnerships with sified under the following broad heads:
state governments can also play a significant role in
implementation of suburban projects. The projections • Capacity constraints;
show that if capacity is built, market share goals are • Lack of clarity on social and commercial
achieved and rationalisation of tariff is carried out, objectives;
IR would be able to finance its investments by 2027-32 • Safety;
mostly through internal generation with little need • Inadequate Research & Development;
for reinvestment of dividends payable. • Optimisation of land use;
NTDPC | RAILWAYS 39

Box 1.12
Assumptions for Internal Generation Projections
The projections for mobilisation of internal resources are based on, inter alia, the following assump-
tions:
• Rail freight traffic would grow at slightly more than 10 per cent in the first nine years and at
close to 13 per cent in the next 10 years to reach around6,500 billion NTKMs by 2032. Thereaf-
ter, rate of growth could slow down and match the rate of GDP growth. This would represent
roughly 50 per cent of the country’s freight transport task in that year compared to 606 billion
NTKMs in 2010-11.
• Passenger traffic (PKM) will grow at close to 9 per cent p.a. to reach around5,700 billion passen-
ger kms in 2032 compared to 1047 billion passenger kms in the year 2011-12.
• Revenue per NTKM (i.e. the freight tariff) will remain unchanged in real terms but revenue per
PKM (passenger tariff) will grow by 4 per cent p.a. in real terms to reach a level of 54.7 paise in
2030 compared to 26 paise at present. If this is done, the freight to fare ratio which is roughly 4
at present will be corrected to 2. The ratio will still not be equal or close to unity as in case of
countries like France and China.
• Other coaching earnings and sundry earnings will increase 5 per cent p.a.
• Operating ratio will start at 98 per cent in 2010-11 and will improve by 1 per cent p.a. till 2016-17
and 2 per cent p.a. thereafter for the next four years to reach 84 per cent in the year 2020-21 where
it will get stabilised.
• Net dividend to exchequer will grow by 10 per cent p.a. and appropriation to Depreciation
Reserve Fund will also grow 10 per cent p.a. from the level of Rs 70 billion budgeted for 2011-12.
• Energy conservation; A line-capacity utilisation of 80 per cent is consid-

• Organisational and Human Resource issues. ered optimum as smooth operation of trains requires
some slack in the line-capacity to absorb and recover
CAPACITY CONSTRAINTS from unforeseen disruptions. Figure 1.22 shows that
189 sections out of the total 212 on the high density
A major reason why Indian Railways has suffered network (HDN) have already reached saturation in
a steady decline in its share in freight and passen- line capacity utilisation. Moreover, 141 sections have
ger transport is that its network is plagued by infra- already crossed 100 per cent utilisation. The unsatis-
structural and carrying-capacity constraints. This factory state of affairs extends to seven other second-
has forced IR to focus on bulk cargo and forego the ary HDN corridors feeding to or distributing traffic
immense opportunity for growth in non-bulk and from the primary HDNs.
non-train-load segments. In passenger traffic, this
has meant that the supply of seats/berths has always Further, both passenger and freight trains share
lagged demand. the same track capacity. The passenger trains utilise
nearly 65 per cent of network capacity but contribute to
As discussed earlier, traffic flows on IR’s network are less than 30 per cent of the revenue. While mixed traf-
highly uneven and imbalanced. As of March 2011, fic is beneficial for efficient use of capital-intensive
the BG network, though forming 85.6 per cent of the railway infrastructure, such operation of mixed traf-
route, generated almost 98 per cent of the passenger fic in the face of saturation on the network imposes
output (PKMs) and 99.9 per cent of the freight output insuperable constraints on running of heavy-haul
(NTKMs). The Golden Quadrilateral and the diago- freight trains and high speed passenger trains, cat-
nals connecting the four major metros, viz., Delhi, egories that can yield maximum efficiency in trans-
Kolkata, Chennai and Mumbai (along with the east- port.
west diagonal extending to Guwahati) constitute less
than 16 per cent of the route, but account for more According to the McKinsey Report15, ‘India’s current
than 50 per cent of the passenger and freight traffic. infrastructure is over-stretched and even with a con-
These routes have reached over-saturated levels of servative annual growth rate of 7.5 per cent, India’s
capacity utilisation and at present are strained to the freight traffic is most likely to more than double by
breaking point (Figure 1.22). 2020. A two-and-a-half times increase in freight traf-
15. McKinsey and Company (2010).

Figure 1.22
Line Capacity Utilisation of Sections on High Density Network (2009-10)
Less than 80%

Mumbai - Chennai 10 9 5 2 26
80% - 100 %
Howrah - Chennai 1 4 7 5 17
100% - 120%
Delhi - Chennai via Jhansi,

Nagpur-Bhallarshah 3 2 5 13 2 25 120 % - 150%
Delhi - Guwahati via Sitapur- More than 150 %

Gorakhpur-Barauni-Katihar 2 13 5 5 8 33
Delhi - Mumbai 3 5 4 11 5 28
Mumbai - Howrah 2 7 19 13 1 42
Delhi - Howrah 2 8 9 17 5 41
0 15 30 45
Number of Sections
fic in the next decade will put further pressure on While IR has to fulfil both the roles, it is essential
India’s logistics. Moreover, investments in the cur- that the commercial and social roles are kept dis-
rent network design will only lead to increased inef- tinct and separate. The commercial part of the busi-
ficiencies and losses.’ ness has to be run with a clear set of objectives and
judged by commonly accepted financial measures
LACK OF CLARITY ON SOCIAL AND such as revenue, profit, return on capital, produc-
COMMERCIAL OBJECTIVES tivity of assets, etc. The social part of the business
would need to meet different goals and judged by
The report of the Expert Group on Indian Railways parameters such as improvement in connectivity,
headed by Dr Rakesh Mohan in 2001 mentioned service level, patronage and efficiency of delivery/
that ‘IR has been suffering from a split person- provision of projects/services.
ality. On the one hand, IR is seen by the govern-
ment, and by itself as a commercial organisation. It is imperative for IR that the projects taken up on
It should therefore be financially self-sufficient. social considerations must be categorised separate-
On the other hand, as a department of the govern- ly and their funding must come separately either
ment it is seen as a social organisation which must through national /strategic projects or from state
be subservient to fulfilling social needs as deemed governments. The two categories of projects must
fit by the government. It is now essential for these not be mixed up and must be handled by different
roles to be clarified’. project organisations with different project leaders.
For long-term sustainability, railways have to be The lack of clarity between its public-service obli-
run as a business on sound commercial principles. gations and commercial objectives affects several
However, the several social/national responsibili- other operational practices/systems of IR, such as,
ties of the IR prevent it from operating on a purely investment planning, project execution, costing &
commercial basis. A large section of the popula- tariff practices, accounting system, etc., making it
tion views it as a public utility and expects IR to even more difficult to reconcile these roles. Some of
discharge a number of social obligations ranging the challenges imposed by these systems are:
from sanction and construction of un-remunerative
lines, provisions of suburban and other passenger INVESTMENT PLANNING
services below cost, transportation of essential Investment planning on Indian Railways is politi-
commodities at a loss, etc. cally and departmentally directed rather than
NTDPC | RAILWAYS 41

Table 1.11
Off Track: Time and Cost Overruns in Railway Projects
DATE OF COMMISSIONING COST OVERRUN
PROJECT DELAY IN MONTHS
ORIGINAL ANTICIPATED (PER CENT)
Udhampur-Baramulla (new line) March-01 Dec-17 201 700
Bankura-Srinagar-Damodar March-05 June-16 135 1162

(Gauge conversion)
Tamluk Digha (Line doubling) June-05 June-16 132 270
Belapur-Seawood-Uran (Electrified March-04 March-14 120 276

double line)
Howrah-Amta-Champadanga (New line) March-07 March-15 96 1,489
Source: Project Implementation Overview, December 2012, MOSPI, GoI.
need-driven. The consequence of political control Replacement and renewal of assets should be ensured.
in a departmental set up has been the extension of For this purpose, the ad hoc approach presently fol-
a number of uneconomic lines with every budget. lowed in respect of appropriation to Depreciation
The project approval process is loaded in favour of Reserve Fund needs to be overhauled. A rule-based
uneconomic, un-remunerative and socially desirable approach that adequately meets the requirement
projects, rather than focus on projects which remove needs to be put in place; and such an approach must
bottlenecks, ease congestion, and augment IR’s satisfactorily provide for the replacement of fixed
capacity to carry traffic, or improve the productivity assets and rolling stock that bring in technological
of operations. upgrade with increased productivity, efficiency and
reduced outgo on maintenance.
For an organisation struggling with crippling capac-
ity constraints over its most important routes, PROJECT EXECUTION
the purpose and direction of investment planning IR has a poor track record of project execution. Sever-
should be clear and obvious. A complete revamping al projects of IR are suffering from time and cost over-
of the investment planning system is required. runs. For example, as of October 2011, out of the total
of 132 projects costing more than Rs 1.5 billion, in 101
IR needs to shift to a programme approach from the projects the anticipated cost is 181 per cent higher than
current project-oriented approach. Plan-head wise the original estimated cost. Moreover, 26 projects are
investment approach has to be dispensed with as it having time overruns ranging from two to 213 months
distorts investment priorities and promotes depart- (Economic Survey 2011-12). Table 1.11 highlights the
mentalism. Investment should be focused on total extent of delays and time overruns in railway projects.
capacity creation including rolling stock, asset
renewal, technology induction, information technol- Some of the major reasons for project delays are as fol-
ogy and identified investments in modernisation, lows:
etc. This should be quantifiable in terms of incre- • At present, a large number of projects are
mental tonne kms. started without adequate funding and without
a specified date of completion. And more often
Prioritisation of projects is crucial especially than not, they are sanctioned without adequate
since IR is struggling with a large shelf of sanct_ field investigation, followed by a detailed pro-
ioned projects in the face of limited resources. ject report. The funds available are spread on
Investment in railways has to be focused and numerous projects instead of providing ade-
directed towards solution of the capacity constraints quate resources for a select few and getting
or improvement of operations. More investment those completed. As a result, every project suf-
should be directed towards projects and activities fers from time and cost overruns.
that would remove bottlenecks and generate the • Railway’s project organisation is also organised
greatest returns. Operationally urgent and quick on a zonal or a territorial rather than on a pro-
pay-off projects that can ease capacity constraints ject basis. This further reinforces the ingrained
the fastest (such as doubling) need to be prioritised practice and bias towards distribution of funds,
for full funding and time-bound execution. For roll- rather than rational allocation of funds to pro-
ing stock, procurement must be linked to the traffic jects that need to be completed on priority.
projections so as to avoid excessive procurement of • Incentives for project teams and leaders to
rolling stock which is less in demand, or under pro- deliver projects on time and within budget are
curement of rolling stock actually required for meet- also absent.
ing demand. • Other reasons for project delays include issues

Box 1.13
Building China’s Railways
China’s railways entered a new phase of development with the Mid and Long-Term Plan (MLTP) adopted
in 2004 and revised upwards in 2008. It currently aims to increase the total rail network from 75,000 to
120,000 route-km by 2020. It includes construction of 16,000 km of high-speed routes, three new regional
inter-¬city networks, new dedicated coal lines and substantial double tracking and electrification.
China has successfully managed to deliver project after project much faster than is typical of just about
any other country. A project that in China might take about 5-6 years from government approval of project
concept to system commissioning would, in the authors’ experience, take 7-15 years in almost any other
country. For example, the 1,068 km Wuhan-Guangzhou high-speed railway, started construction in 2005 and
was commissioned in December 2009.
Following three factors dominate the reasons for this exceptional project delivery:
• Single-Point Responsibility: China’s Ministry of Railways (MOR) enjoys a potent combination of:
(a) the responsibility to plan, design and deliver major projects; (b) the legal and institutional power
it needs to do so, and; (c) access to the operating cash flows of one of China’s largest single business-
es to borrow against, together with a dedicated capital fund from railway construction surcharges
on freight. This heady confluence of responsibility, power and resources, has created a goal-driven
culture at all stages of project delivery.
• Strong Technical Capacity and Process: MOR adopted the ‘six in one’ principle as the foundation
for railway project implementation; which encompasses quality, safety, completion time, investment
benefit, environmental protection, and technical innovation. Following are some of the initiatives
taken across all stages of the project cycle, from planning to commissioning:
• Planning and Design: The priority and time-frame for project implementation (including the
budget, technical parameters, preliminary design and schedule for each project) are frozen at
the point of National Development and Reform Commission (NDRC) approval. The detailed and
meticulous planning and design facilitate timely implementation as there are minimal changes
during construction.
• Procurement: Standardisation of designs and technical specifications, administering procure-
ment through professional tendering companies, emphasis on physical and financial capacity
on contractors, tight contract award process etc. are some of the factors that assist expeditious
procurement.
• Project Management: MOR establishes a project management team which is delegated the
funds, the design and above all the authority to implement the project. The project team remains
together until the job is done and is held fully and collectively accountable. This continuity,
together with significant financial incentives built into team earnings for timely delivery of the
project, acts as a strong motivator of team performance.
• The Programme Effect: The articulation of the MLTP and its scale resulted in a programme effect.
The programme effect created a whole new industry that was confident in the continued long-term
development of China’s railways, and led to a huge increase in the capacity of the industry, from
technical institutes through to contractors, manufacturers, service suppliers and many others.
Source: China Transport Topics No. 03; Fast and Focused— Building China’s Railways; World Bank Office, Beijing.
like land acquisition, clearances, shifting of • Considering the need for massive capacity
utilities resettlement & rehabilitation, etc. augmentation over the next 20 years, it is rec-
ommended that a separate body/organisa-
IR must review and adopt some of the best prac- tion, partially independent of the Ministry
tices in project execution from China’s railway sec- of Railways should be set up to expedite the
tor, which has built an astonishing number of large delivery of projects. Such a body should have
and complex railway projects over the past few years greater autonomy, for example, the author-
(Boxes 1.13 and 1.14). ity to finalise tenders for projects. Box 1.15
provides some recommendations on the
RECOMMENDATIONS institutional arrangement for speeding up
Following are some of the recommendations which capacity enhancement and project execution
should be implemented to improve the project execu- on IR. Here it may be mentioned that in the
tion on Indian Railways: Railway Budget 2011-12, a Central Organisa-
NTDPC | RAILWAYS 43

Box 1.14
China’s Railways’ Building Skills and Knowhow to Improve Project Delivery
The short time taken for delivering projects on China Railways follows years of investment in building
skills and know-how. Ministry of Railways (MOR) in China undertook years of capacity building lead-
ing up to the MLTP. For e.g., in case of high-speed passenger lines, specialised units were set up many
years in advance to study and adapt technologies employed internationally such as track systems,
rolling stock design, signalling and communications, and electric traction. The technologies selected
were absorbed, in some cases by technology transfer agreements with foreign manufacturers, but with
considerable adaptation to match China’s needs.
There are six major railway design institutes in China. All except one are legally independent
of MOR, though they are commercially dependent on MOR contracts, for which they compete (all
are state owned enterprises). Their role typically includes route surveys, environmental assessments
(sometimes with specialist environmental firms), project feasibility reports and preliminary and
detailed designs.
Typically each major design institute employs about 3,000-4,000 people. This capacity togeth-
er with a singular focus provides the means and the ability to produce a feasibility report
within a 6-12 month time frame. In most countries feasibility studies for major railway construc-
tion projects take up to two years to specify, procure, complete and report.
Source: China Transport Topics No. 03; Fast and Focused— Building China’s Railways; World Bank Office, Beijing.
tion for Project Implementation (COPI)16 was sioning. The concept of financial close (as in
proposed to be set up with offices in Delhi, case of PPP projects) should be introduced for
Kolkata, Mumbai and Bengaluru, each headed each project.
by an officer of GM rank. COPI was to ensure • The project managers should continue in
uniformity of systems/methodologies, follow their positions till successful completion of
the best practices and optimise on resources. the project, and they along with the project
It was expected to monitor and ensure that the teams should be held accountable for timely
funds allocated to different projects are fully completion of the projects.
utilised and not surrendered or diverted, and • Performance-linked incentives should be pro-
that the projects are completed in time. How- vided and penalties for failure should also be
ever, no progress has been made on the ground imposed. Best practices in contract manage-
for setting up of the COPI. In any event, the ment should be identified and introduced.
entire issue of setting up agencies for project
execution needs a review, considering that ACCOUNTING SYSTEM
as on date, zonal railways, Rail Vikas Nigam Being a ministry of the GoI, the accounting system
Limited (RVNL) and Dedicated Freight Cor- of the Indian Railways is organised to cater to gov-
ridor Corporation of India Limited (DFCCIL) ernment budget and control functions and does not
are involved in execution; a rationalisation follow accounting standards as prescribed in the
with the objective of ‘in time delivery’ with Companies Act 1956. The Acworth Committee (1920-
massive investments contemplated is the 21) recommended the separation of railway finances
objective. from the general exchequer, because the budget of IR
• DFCCIL, besides handling the Eastern and formed a significant portion of the total government
Western corridors, should also be given the finances and there was considerable unease in keep-
project execution responsibility for the other ing it as an integral part of the overall budget. The
four proposed high speed corridors. Addi- separation of railway finances (effected in 1924) and
tionally, it may be given the responsibility for the creation of an in-house accounting machinery,
capacity augmentation of the entire high den- however, also intended to ensure flexibility in the
sity network. DFCCIL should be given more financial administration of the railways as a com-
autonomy - instead of the Chairman Railway mercial undertaking.
Board (CRB) acting as the part time Chairman
of DFCCIL, the Managing Director should be The accounting and financial systems of IR have been
made the Chairman. reviewed by various committees since 1924, and each
• Funding should be earmarked for each project one of them have found the existing system unsat-
before it is taken up for time-bound commis- isfactory and affirmed that the original intention
16. Speech of the Railway Minister, introducing the Railway Budget 2011-12.

Box 1.15
Institutional Arrangement for Speeding Up Capacity Enhancement on IR
IR carries out its construction projects through a construction wing which works in every Zone under
the General Manager. The budget of this department varies from Rs 2.5 billion to around Rs 10 billion,
a bulk of which goes unutilised for tailor made reasons which are endemic on every Zone. The annual
budget of IR for such construction works is around Rs 300 billion and for achieving the growth envis-
aged for the year 2032, we may have to upscale it to Rs 1,000 billion. At present, works on IR are sanc-
tioned at current rates and token allocation of funds is made till the project takes off. After this, the
political sagacity compels allocation of funds to as many projects as possible and speedy completion
becomes the first victim of the process. There is an urgent need for an organisational restructuring -
both functionally as well as administratively.
Following are some recommendations:

• All works having a budget outlay of more than Rs 5 billion (or may be Rs 10 billion) should be
entrusted to an ‘Authority’, which may be called the ‘National Railway Construction Author-
ity’ (NRCA).
• The NRCA would be an umbrella organisation having a national level presence, fully autono-
mous, and having extensive powers for award of works. It will award contracts for construction,
supervise quality of construction and would ensure smooth flow of funds for the works to con-
tinue unimpeded. Repayment of loans, tax-free bonds etc. would be channelised through it.
• The projects should be taken up as EPC contracts with fixed time-outlay and watertight fund
provision. No time over-run and cost over-run may be allowed.
• Sanction of the project should be for the cost as envisaged till its completion so that no further
sanctions are necessary.
• The chief of the NRCA should be selected through Public Enterprises Selection Board (PESB).
He may be allowed to have his team selected through another well-defined process of selection
to scout and attract best talents available in the country.
• The NRCA will have a multi-disciplinary structure to ensure that all decisions relating to every
facet of construction are taken under single roof. It may engage Advisors of international and
national repute in various fields to assist it in discharging its duties in the best possible manner.
• Various agencies instituted by the Railway Ministry for expediting construction like DFCCIL,
RVNL etc. may either be transferred under NRCA’s control or allowed to participate in the bid-
ding process for award of contracts for construction to have better competition.
The establishment of NRCA can go a long way in ensuring speedy completion of important
Railway capacity enhancement projects.
Source: NTDPC.
of commercialisation has not been achieved. IR has and internal surplus over the next 20 years,
continued to be run like a government department in order to undertake the envisaged capac-
rather than as a commercially oriented enterprise, ity augmentation to improve the modal share
and its accounts are not in line with normally used of IR in freight transport. In order to access
commercial conventions recommended by ICAI. The capital from external sources, it is essential to
financial results of IR, as presented to Parliament recast IR’s accounts in a format that is readily
and for public information, include a Statement of interpretable by lenders and investors. The pre-
Revenue Receipts and Expenditure (Profit and Loss sent system of accounting does not give a true
account) and a Balance Sheet, however, the con- and fair financial picture of IR. For example,
tents of these documents depart substantially from the balance sheet does not show depreciation
the disclosure standards that are expected of going provisions and as a result it is impossible to
concern entities. Box 1.16 highlights some of the ascertain the net block of IR. Similarly, there
anomalies and limitations of the present accounting is a no clear separation between revenue and
system of IR. capital, or between ‘top of the line’ and ‘below
the line’, and the data is presented in a way in
It is imperative that IR’s accounting system is which one cannot ascertain labour productiv-
revamped for the following reasons: ity or employee cost.
• IR requires a substantial infusion of funds • IR must focus on financial discipline and tar-
from sources other than budgetary support geting so as to ensure generation of sufficient
NTDPC | RAILWAYS 45

surplus for investing in capacity enhancement. ments should be attempted. This would facili-
The present system of accounting gives lit- tate determination of cost of infrastructure
tle information on how to control costs, as services and the operational activities with
accounts are kept on ‘heads of account’ rather an acceptable degree of exactitude and help
than on the basis of activities. The accounts decisions on rational pricing on the basis of
do not provide a clear segregation on the cost train-wise, route-wise profitability analysis.
and revenue of various activities and servic-
es. As a result, computation of the losses on The need for Accounting Reform has been recognised
various activities and the contribution made and accepted in the Railway Board. An Accounting
by various services is difficult. It is critical for Reform project was initiated and sanctioned in 2004-
any business entity to gain an appreciation 05. However, the work has made a tardy progress and
of its profit centres to manage them better. the final results are far off yet. There is a need to has-
IR’s accounting system should be revamped to ten and complete the process.
accurately reflect the cost of various activities
and throw light on train-wise and route-wise If the railways undertake the kind of accounting
profitability to aid managerial decision-mak- reform proposed, it will become much easier to
ing. This would help assess the usage charge make informed decisions on the areas of investment
of infrastructure and rolling-stock resources where budgetary support is to be given. For example,
and also in accurate allocation of overheads. It budgetary support could be provided in three parts.
would also help in computation of the cost of First, support could be provided to the commercially
operation of trains and services and appraisal justified remunerative projects which are part of a
of profitability of various business lines. strategic plan. Second, where the government man-
dates new lines for social considerations, funds could
• It is important for IR and the Railway Board be provided on a grant basis. Third, budgetary sup-
to know how the organisation would fare if port could also be provided for the projects/schemes
its accounts were presented as per the Indian that result in immediate benefit by way of increased
GAAP followed by companies incorporated throughput for greater efficiency or cost reduction
under the Companies Act. or on the grounds of safety considerations, that is,
implementation of a ‘modernisation plan’.
Only with a credible accounting system, IR can man-
age the commercial and social parts of the business on COSTING & TARIFF PRACTICES
a rational footing. The commercial part of the busi- Costing and tariff practices have had a long-term
ness must be managed to yield a surplus for reinvest- impact on the expenses and earnings of IR, and the
ment in the system. ability of managers to assess and control the same.
RECOMMENDATIONS Current costing practices are based on a top-down

Following are some of the recommendations which approach, using total cost at an aggregate level, and
should be implemented in a mission mode approach are not based on activity-level costing. However, dis-
to ensure timely completion: aggregated information is necessary for pricing. Fur-
• It is important that the accounts of the Rail- ther, since the costs on railway networks are largely
ways should be recast into a company account common (or joint) to different services and a substan-
format in line with the Indian GAAP so that tial part of the costs are fixed, the economies of scale
the true state of Indian Railways finances can be fully exploited only with large traffic volumes.
become clearer. It would provide activity- This renders a certain degree of cross subsidisation
based revenue cost data meeting generally between services and/or between segments of the
accepted accounting standards. Such an network unavoidable. This has matched well with the
accounting reform would facilitate assess- conventional theory of price discrimination which
ment of profitability of different operations, provided the basis for differential pricing (differing
routes and sections and accounting separa- price elasticities) and hence cross subsidisation.
tion of various lines of business and services
within the lines of business. The principles Historically, passenger services have been incurring
for identification and allocation of joint costs losses at the aggregate level, made good by cross-sub-
and methodology for computation of opera- sidy from freight services. The cross subsidisation
tion and maintenance cost should be possible. exists at different levels17:
Such recasting is feasible since it has already a. Cross subsidisation between freight and
been done on a pilot basis first by the Railways passenger services: here it must be under-
Capital Restructuring Committee, 1994 and by stood that passenger service is a direct con-
the 2001 Expert Group. sumption item while freight service is an
• Codification of these principles and develop- intermediate item. Cross subsidisation here
ment of an IT-based system to provide timely has involved imputing a lower weightage to
compilation of accounting and budget state- surplus generation by producers vis-à-vis
17 AITD (2000); Report of the Working Group on Railways (NTDPC).

Box 1.16
Limitations of The Present Accounting System of IR
Limitations of the Statement of Revenue and Expenditure (Profit & Loss Account):
• Inadequate disclosure in respect of the in-house manufacturing effort: IR engages in manu-
facturing operations through its major production units and by virtue of a large number of
engineering and repair facilities where substantial production effort is carried out. The P&L
Account does not disclose the value of the manufactured goods, the disposal on completion of
production or internal capitalisation.
• Depreciation Reserves: The amounts allotted to Depreciation Reserve Fund (DRF) tend to be
fixed in an ad-hoc manner and are not determined by financial principles that would withstand
close scrutiny. Also, the reduction in the value of total assets post-depreciation is not shown.
• Contribution for Pension Payments: The procedure adopted by IR with regard to pensions is
what is normally termed as ‘pay as you go’, a system that no commercial enterprise operating in
a market environment can sustain for long. For an organisation such as IR that spends over half
of its revenues on staff related expenses, the practice precludes reliable long-term financial
projections and prudent financial management itself.
• Utilisation of Net Revenue: The residual of gross traffic receipts after meeting working
expenses and allocation to the two funds (DRF and Pension Fund) is termed ‘net traffic receipts’.
The sum of this figure and the miscellaneous transactions is called ‘net revenue’. In a manner
of speaking the ‘net revenue’ corresponds to IR’s gross profit. The ‘net revenue’ (in IR termi-
nology) is allocated for - (a) Payment of the interest on loan capital to GoI, representing the
servicing cost for IR’s capital-at-charge (termed ‘dividend’ in Railway accounts); (b) anything
that remains after payment of ‘dividend’ is transferred to other Railway funds (Capital Fund,
Development Fund, Safety Fund) that are used for IR’s plan expenditure.
Though the Companies Act lays down that no dividend shall be declared until provision is made for
depreciation on fixed assets of the company, IR, being governed by separate provisions, has been
paying out dividend to the government on the capital-at-charge without observing this require-
ment.
Further, the Capital Fund was set up in 1992 with the original objective of financing schemes
like gauge conversions, doublings and route electrification which were insufficiently funded by
amounts received as ‘Budgetary Support’. In practice, much of this investment has gone to finance
projects that are not remunerative.
Limitations of the Balance Sheet:

• Unreliable estimate of capital stock: IR does not maintain a register of assets. The bal-
ance sheet does not separately show gross block, depreciation and net block. All assets are shown
at original costs, and further capital expenditure incurred from year to year is capitalised. The
leased assets are not shown separately. Fixed assets are not classified in terms of opening bal-
ance and additions/deletions for the year.
• Depreciation Reserve Fund: The sum of the amounts that are appropriated annually to the
DRF are not shown in the balance sheet but only the so called ‘improvement element’ is report-
ed. Because of this, there is no depreciation provision in the application of funds and, hence,
no net block. This has two implications. First, IR overstates its profit by under-provisioning
for the amounts earmarked for the DRF. Second, and much more serious, IR has grossly over-
capitalised itself.
surplus generated by consumers from a lower appropriately differentiating the product and
passengers tariff. accordingly attempting to recover the cost of
b.
Cross subsidisation between different services. This would help delimit size of the
classes of passenger traffic: part of the market requiring effective subsidy.
problem is that the willingness to pay by c. Cross subsidisation across the zones: This
common people is often deliberately under- is partly because of the composition of traf-
estimated. It should be easily possible to seg- fic. The passenger component is substantial in
ment the market for the passenger services by many of the zones, and as a result the losses
NTDPC | RAILWAYS 47

Figure 1.23
Average Realisation on Freight and Passenger and Fare-to-Freight Ratio
120 0.35
0.32 100 0.30

100
0.30 0.29
0.28 0.25
0.27 0.27
Fare - Freight Ratio

Earnings (in Paise)
80 0.26
75
0.20
60
0.15
40
0.10
25 26
20 0.05
0 0.00
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Earnings per NTKM (Paise) Earnings per PKM (Paise) Fare-Freight Ratio
Source: White Paper on Indian Railways 2009, Yearbook 2010-11, Yearbook 2009-10.
cannot be compensated by profit from the provider, a new market for access to paths and pric-
freight segment. ing of paths, has developed. Thus at this stage Indian
Railways has to make a choice - whether to continue
However, cross subsidisation has resulted in high to rely on a regime of commodity based pricing or to
tariffs for freight and diversion of traffic to non-rail move to newer methods of pricing.
modes involving higher use of scarce resources of
the society. In other words, the market response to There are two key aspects of commodity based pric-
the cross-subsidy may also lead to sub-optimal allo- ing:
cation of resources. The extent of effective cross- a) The ability to correctly discern what the
subsidy needs to be measured to determine an opti- commodity can bear: In recent years, in the
mal level of cross-subsidisation. case of iron ore for export, the railways were
able to informally peg the price to the export
Figure 1.23 shows some of the parameters that price and thus align itself to the market. How-
emphasise the cross-subsidisation on IR. The aver- ever, for other commodities there are no such
age realisation for PKM at 26 paise is one of the low- readily available proxies which the IR can use
est in the world while average freight revenue per to gauge the market. It would probably not be
NTKM is one of the highest in the world, second unfair to state that the IR priced itself out in
only to Germany (White Paper on Indian Railways, the case of POL products when pipelines were
2009). On the passenger side, the range between the being considered as an alternative.
lowest charged and the highest charged classes is
wide (from 13 paise per PKM to Rs 1.06 per PKM). b) To know the cost of transportation: As dis-
Fare to freight ratio that roughly captures the bal- cussed above, in IR costs tend to be aggregated
ance between the passenger fares and freight tariffs and averaged in a manner that does not clear-
is also one of the lowest in the world for Indian Rail- ly indicate the commodity specifics. Greater
ways (0.27) compared to France (1.3) and China (1.2). emphasis on disaggregated costing methodol-
The above clearly argues for the need for rational non- ogies is important in a commodity based pric-
distortional prices for freight and passenger services. ing regime.
Freight Pricing: The freight rates are commodity The commodity based pricing has undergone a lot
specific and yet costs are not available at commod- of rationalisation over the last decade or so. IR used
ity level. The logic for pricing based on the ability of to have a large number of classes for freight tariff.
the commodity to bear is an age-old principle in the These have been compressed and the range between
Railway industry. In recent times, however, most rail- the lowest charged and the highest charged classes
ways worldwide have moved away from a commodity has narrowed considerably. Following are some of
based pricing mechanism to either a haulage costs the recommendations for freight pricing:
based rating or individual contractual agreements • For loose bulk commodities, the current
based on the shipper’s requirements. With the sepa- regime of pricing is a good approximation
ration of the infrastructure owner and the service and provides the right incentives. Non-price

Figure 1.24
Increase in Wholesale Price Index and Passenger Fares (1993-2011)
295
300
280
259
260
240
Percentage Increase
216
220
196
200
176
180
161
160 150 150 150
145 144 144
133 138
140 138
122 119 119 119
120 112 112 112 106
106 106
100 105
100
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Sleeper Class WPI 2nd Class
Source: Report of High Level Safety Review Committee, Ministry of Railways, 2012 (Kakodkar Committee).
factors are critical for obtaining a better some form of Government financial support for
share and in the case of certain commodi- passenger services (summarised in Annex 1.3).
ties the Railways should consider long-term
contracts to bring about greater efficiency in India’s average passenger yield, adjusted for parity
investments. of purchasing power, is about 11 per cent of that of
• For bagged bulk commodities and non bulk Japan, 15 per cent of that of Germany and Russia
commodities, the current regime is too cen- and 37 per cent of that of China (Box 1.18). In India,
tralised and therefore slow to respond to the passenger fares have not been increased in
market changes. Service-based pricing to last 10 years and their present level is ridiculously
attract traffic in these industries would help. low even as compared to the bus fare (Figure 1.24).
• For the growing sector of containerised However, in the context of limited resources avail-
goods, greater research on the method of able to the Railways, sustainability of the existing
calculation of efficient haulage charges is subsidy regime needs to be seriously considered.
required. Further, shift in the relative price of passenger rail
travel vis-à-vis other modes of travel affects the
Passenger Pricing: As mentioned earlier, the Indi- modal choice of many passengers, and thus inflates
an Railways, in addition to their commercial role demand and creates pressure to add more services.
as a provider of transport services, is also seen to
have social/national responsibility to link people For the year 2010-11, losses from passenger services
and places and facilitate rapid and low cost move- are estimated to be around Rs 165 billion, with a
ment across the country. To meet this objective the total revenue of Rs 258 billion (Figure 1.25). The
Railways provide several services at prices that are suburban segment incurred a loss of Rs 23 billion
below the cost of provision and this has virtually (roughly 125 per cent of its revenues), whereas the
governed most of the policy decisions often away non-suburban segment incurred a loss of more
from the most economically sound ones. than Rs 141 billion (roughly 60 per cent of its rev-
enues). These losses are due to a combination of
The pricing of passenger services is a highly politi- factors including non-revision of passenger fares
cal issue and not dictated entirely by efficiency for the last 10 years, running of poorly patronised
considerations. These services are heavily under- trains, operations of trains on uneconomic loss-
priced even though their economic costs are high. making branch lines and running of slow, stop-
International comparison with China, Germany, ping passenger trains for short distances. Ticket-
Japan and Russia shows that the pricing of passen- less travel also contributes to losses to some extent.
ger services is a politically and socially sensitive However, train-wise disaggregated analysis is pres-
issue not only in India, but even internationally. ently not available.
However, all these countries impose some statuto-
rily-backed fare regulations on their passenger rail Looking at the financial situation of IR, with its
services (Box 1.17). All four countries also receive operating ratio rising to 95 per cent over the last
two years, it is imperative that IR designs a realistic
NTDPC | RAILWAYS 49

Box 1.17
Tariff Regulation: Government Control in Varying Measures
Germany, Russia, China and Japan all impose some statutorily-backed fare regulations on their passen-
ger rail services. This clearly reflects the high social and political sensitivity of passenger transport
fares in all the countries, irrespective of political system.
China lies on one extreme of the fare regulation spectrum, with highly centralised government control
of passenger railway prices. Under the 1991 Railway Law, passenger fares proposed by the Ministry
of Railways must be approved by the State Council via its macro-economic management agency. All
China Rail tariffs as well as those of inter-Provincial joint venture and local railways are included in
this regulation. Special pricing policies also exist for certain train categories such as high-speed train
services.
In Japan, ministerial approval of Japan Rail maximum fares is required and companies are obliged to
adopt co-ordinated structures that enable smooth inter-ticketing and travel across Japan. In consider-
ing fare proposals the Transport Minister must take into account the level of fares in relation to effi-
cient costs plus ‘appropriate’ profits. The Minister can also order changes if the charges discriminate
against certain classes of passenger or if the charges may cause ‘unjust’ competition against another
railway. In addition to general co-ordinating mechanisms in setting and administering rail fares, when
transfer between companies is required companies are obliged to set fares to take account of the total
distance and to taper the fare accordingly.
In Russia, the Federal Tariff Service (FTS) has strong regulatory powers but has granted much great-
er freedom and now effectively only regulates non-premium tariffs. FTS is responsible for regulating
charges and fees for services which involve transport of passengers by long-distance trains on Russian
domestic routes, whether by RDZ or private operators.
Even in Germany, where there is substantial commercial freedom to set fares, the government has
formal approving authority for general fare increases (and changes in conditions of carriage) on long-
distance routes. The Bundestag (parliament) also regularly scrutinises rail fare proposals. As this is
based on the principle of undistorted competition and commercial operations, in practice fares are
generally approved as a commercial decision of the companies involved and the practical regulation is
very light. The systems are summarised in the table below.
COUNTRY PASSENGER FARES REGULATION
China Heavily Regulated.

State Council has complete regulatory powers, but has granted more flexibility in
recent years to reflect wider range of service qualities.
Russia Regulated.
Federal Tariff Service regulates domestic long-distance fares but since 2009 has
granted independence of pricing for premium travel classes and trains.
Japan Lightly Regulated.

Maximum fares must be approved by Minister of Transport, and companies must
coordinate fares and ticketing systems to allow smooth transfer between compa-
nies at non discriminatory fares.
Germany Very lightly Regulated.

Federal government must approve conditions of carriage including standard fare
but policy is that long-distance markets should be regulated by competition.
Suburban/regional fare regulation differs by concession.

Box 1.18
India’s Unyielding Railways: International Comparisons of Passenger
Revenue Yield
Within any railway there are large variations in cost recovery between the different types of passenger
service and different routes. Unlike the transport of rail freight, the costs of a passenger train move-
ment for which the train-consist has been determined is almost independent of the number of passen-
gers using it. Railway management should therefore attempt to match the size of trains to the general
level of demand offering. However, fluctuations in traffic by day of week and time of day mean that
there is often much unused capacity even with very efficient operations. Highly peaked regional/sub-
urban services tend to have much lower yields/carriage-km compared to costs, relative to less peaked
inter-city services.
When other things are equal, railways in developing countries face an inherently greater challenge in
attaining cost recovery in passenger rail services. The ratio of rail operating costs between efficient
railways in high-income countries to those in low-income countries is relatively small, say 2:1 at most
(as the cost of many of the inputs, fuel and spare parts are the same in both cases). However the equiva-
lent ratio for income per head may be up to 10:1 and this income disparity affects the affordability of
fares. Railways in developing countries must therefore attract a healthy proportion of higher income
earners within the country into their customer mix. The economics of rail technology depend on deliver-
ing the superior travel benefits the technology can offer to those who can afford it, and pricing accord-
ingly. The more successful a company is in providing an attractive travel product at healthy fares the
more scope it has for offering cheaper fare options at the margin. As incomes (and costs) increase,
positioning the main role of passenger railways as cheap transport for low income groups is a recipe
for mounting financial stress.
India’s average passenger yield, adjusting for parity of purchasing power, is about 11 per cent of that of
Japan, 15 per cent of that of Germany and Russia and 37 per cent of that of China. When adjusted for
parity of purchasing power, Japan (which receives no revenue subsidies) has the highest farebox yield,
Germany and Russia have lower yields but of a mutually similar order, while China has the lowest
yield of the four countries. The table below provides a comparison.
AVERAGE PASSENGER FAREBOX YIELD PER PASSENGER-KM (2010)
YIELD/PASS-KM YIELD/PASS-KM YIELD/PASS-KM

COUNTRY (LOCAL CURRENCY) (USD) (USD PPP)
China CNY 0.15 0.024 0.038
Germany EUR 0.09 0.126 0.087
Japan JNY 14.61 0.190 0.132
Russia RUR 1.50 0.052 0.094
India INR 0.26 0.006 0.014
Notes to table:
1. The yields are brought to a common basis of USD rates using currency exchange rates as of 30 August 2010.
2. Because of the disparity in income levels between countries, the results are also shown in USD adjusted for Purchasing Power Parity. Rates used for purchase
power parity conversion are as recommended by World Bank for 2010 values.
3. German estimates are for DB long-distance and DB Regional combined but exclude non-fare income from concession contracts.
4. Japanese estimates are for JR companies and private companies combined.
5. Includes both RZD (Russian Railways Corporation) and its subsidiary Federal Passenger Company, plus jointly-owned regional/suburban passenger companies.
Excludes revenue shortfall income provided by the Russian Government.
NTDPC | RAILWAYS 51

Figure 1.25
Passenger Business: Revenue and Losses (Rs Billion) and Loss Ratio (Per cent)
300 140
258
239 120
250 124
100
Revenue and Losses
200
Losses/Revenue
(Rs Billion)
165
(per cent)
80
142
150
60
64
59
100
40
50
20
19 23
0 0
Suburban Non-Suburban Total Passenger
Revenue Losses Losses/Revenue (percentage)

Source: Ministry of Railways
programme of fare revision to reduce/eliminate the regulator is often instituted to set prices based on true
losses on passenger services. The government may costs revealed by the monopolist or near monopolist.
subsidise up to 25 per cent of the costs of suburban The need for setting up a Rail Tariff Authority has often
railways considering that mobility is an important been stressed in this context.
element in the ability of the people to access bet-
ter economic opportunities and a large number of It is recommended that an independent Rail Tariff
people use the suburban network on a daily basis. Authority (RTA) should be constituted at the earli-
Box 1.19 gives a simplistic programme for fare revi- est to fix tariffs for both passenger and freight. The
sion in order to eliminate the losses on passenger Expert Group for Modernisation of Indian Rail-
services. ways, headed by Dr Sam Pitroda, had also recom-
mended the need for setting up such a Rail Tar-
Tariff Setting: Under the provision of the Railway iff Regulatory Authority in order to provide a
Act, 1989, fixation of freight and fares is the preroga- level playing field to all stakeholders. Setting up of
tive of Ministry of Railways. Railway Rates Tribunal the RTA could depoliticise the process of setting the
(RRT) and Railway Claims Tribunal are the two dis- passenger fares, which were not raised for close
pute settlement bodies on IR. However, their mandates to a decade, until recently, due to populist pressures. It
and powers are limited to complaints against Rail- would also help in expansion of the PPP programme
ways relating to discrimination and excess charging, of the Railways and could also arbitrate disputes
etc. by the freight customers and disputes arising out and grievances of freight customers and PPP conces-
of claims settlement respectively. Therefore, in the sionaires.
current scenario, the Ministry of Railways plays the
dual role of the provider and the regulator of these ser- Further, an institutional mechanism to gather, ana-
vices. In other sectors like power, telecom, major ports, lyse and use cost data and market intelligence needs
etc. an independent regulator has been established to to be established. With computerisation of freight and
regulate tariffs. passenger transactions, Railways now have a huge
database. This needs to be used to gain insights on the
Efficient prices or non-distortionary prices are typi- behavior and preferences of passengers and freight
cally the outcome of a highly competitive market or an customers. This would need expertise and it is not
effective regulator. Indian Railways operates in a high- possible to recruit and retain such expertise within
ly competitive environment in several freight and pas- the Railway Board on a sustainable basis. This can
senger segments, but in a few others, it faces little or perhaps be done through a CRIS project to design and
no competition. Further, the externality effects are not install a decision support system for the rates direc-
reflected in the prices. In the absence of competition, a torate.

Box 1.19
A Simplistic Programme for Fare Revision
Three alternate scenarios for fare revision have been examined, based on two factors:
(a) Subsidy provided for Suburban railways, and (b) timeframe.
Common Assumptions across the three scenarios:

• Revenue and loss figures for the year 2010-11 have been used as the base to calculate the required
revision in fares.
• The proposed fare revision under the three scenarios has not been adjusted for inflation; i.e.,
it is assumed that in addition to the proposed revision under the three scenarios, the fares will
also be adjusted proportionately to change in costs.
SUBURBAN NON-SUBURBAN
Revenue (Rs Billion) 18.7 239.2
Loss (Rs Billion) 23.2 141.7
Loss /Revenue (Per cent) 124 Per cent 59 Per cent
SCENARIO I
Subsidy (on cost) 0 Per cent 0 Per cent
Timeframe for fare revision 10 Years
Required increase in revenue to incur 'zero loss'* 124 Per cent 59 Per cent
Fare increase each year (per cent) 8.4 Per cent 4.8 Per cent
SCENARIO II
SCENARIO III
* The figure is adjusted based on subsidy provided.
Source: NTDPC.
With accounting reforms it should be possible for the Level Safety Review Committee18 under the Chair-
RTA to determine the costs of operating uneconomic manship of Dr Anil Kakodkar. The Committee exam-
railway lines built on social consideration and losses ined all technical and technology related aspects in
on passenger services on account of subsidised tariff- connection with safe running of train services in
setting. The government will have the option of clos- the country and highlighted many discrepancies in
ing operation of such lines or services or raising tariff. current safety practices caused by poor maintenance
Alternatively, the government could decide to provide of equipment and installations, lack of trained staff,
subsidy as determined by the authority. and inability to adapt to new technologies. The Com-
mittee submitted its report in February 2012 and
SAFETY noted that:
Safety on IR has always remained a pressing issue. ‘There is no practice of independent safety regula-
Concerned with the high rate of railway accidents in tion by an independent agency separate from opera-
India and to prepare a roadmap for improving safety tions. The Railway Board has the unique distinction
on IR, the Ministry of Railways appointed a High of being the rule maker, operator and the regulator,
18. HLSRC (2012).
NTDPC | RAILWAYS 53

Figure 1.26
Number of Train Accidents and Accidents per Million Train Km
250 0.25
195 194
0.23
0.22
Train Accidents per million train kms

177
200 0.19 0.2
165
Number of Train Accidents
0.17
139
150 77 0.14 0.15
79
69
70
53
100 0.1
96 100 85
50 80 0.05
80
0 0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
Collisions Derailments
Level Crossing Accidents Fire in Trains
Miscellaneous Accidents Train Accidents per Million Trains kms
Source: Report of High Level Safety Review Committee, Ministry of Railways, 2012 (Kakodkar committee).
all wrapped into one. Commissioners of Railway The consequential train accidents per million train
Safety though considered to be the safety watchdogs kilometre have also shown a steady decline from
have negligible role at the operational level. Compli- 0.23 to 0.15 during this five year period (Figure 1.26).
ance of safety standards set by Railways for them- Derailments and accidents at level crossings consti-
selves are often flouted for operational exigencies.’ tute account for roughly 90 per cent of the total acci-
dents. Moreover, roughly 85 per cent of accidents on
The Commission of Railway Safety, working under IR are alleged to be on account of human failure20.
the administrative control of the Ministry of Civil
Aviation of the GoI, deals with matters pertain- Though the data of consequential train accidents
ing to safety of rail travel and train operation and over the years has been showing a declining trend
is charged with certain statutory functions as laid despite phenomenal growth of traffic, safety on IR
down in the Railways Act (1989), which are of an still remains a matter of great concern as the total
inspectorial, investigatory and advisory nature. casualties have increased from 610 to 844 during
The most important duty of the Commission is to the same period. Further, close to 50 per cent of the
ensure that any new Railway line to be opened for casualties happen due to accidents at level crossings,
passenger traffic should conform to the standards while collisions account for about 25 per cent of the
and specifications prescribed by the Ministry of casualties (Figure 1.27).
Railways and the new line is safe in all respects for
carrying of passenger traffic. This is also applica- The report of HLSRC also highlighted that the data
ble to other works such as gauge conversion, dou- maintained in the Railway Board office pertains
bling of lines and electrification of existing lines. to only those train accidents with apparent conse-
Commission also conducts statutory inquiry into quences. The casualties due to trespassing of railway
serious train accidents occurring on the Indian track, or for other reasons connected with railway
Railways and makes recommendations for improv- infrastructure and casualties of IR’s own staff while
ing safety on the Railways in India19. on duty, though quite substantial, are not included
in the statistics of train accident related casualties.
A review of the statistics for safety on Indian Rail- Total deaths and injuries among railway passengers
ways shows a sustained reduction in number of con- and others on railway property not considered as
sequential train accidents per year despite phenom- ‘consequential’, or due to a fault of the Indian Rail-
enal increase in volumes of traffic, both passenger ways, were reported to be around 25,900 for 201121.
and freight. The total consequential train accidents Further, during the period 2007-08 to October,
have come down from 195 in 2006-07 to 141 in 2010-11.
19. http://civilaviation.gov.in/CRSS/Commission%20of%20Railway%20Safety.html (accessed September 23 2012).

20. HSLRC (2012).
21. National Crimes Record Bureau (2012).

Figure 1.27
Total Casualties in Train Accidents (2006-11)
(Per cent)
FIRE
1
MISC
7
UNMMANED LC
42
COLLISIONS
25
MANNED LC DERAILMENTS
6 19
2011, about 1,600 railway staff were killed and 8,700 headquarters) for ensuring day to day com-
injured while on duty22. pliance with safety standards, studying effec-
tiveness of existing policies and standards,
The committee also gave detailed recommendations conducting safety audits, collecting relevant
for enhancing safety on IR, some of which are sum- data, etc. These departments must employ
marised in Box 1.20. 50-60 per cent professionals with expertise in
the relevant area of safety, and 40-50 per cent
RECOMMENDATION: of the staff could be on deputation form the
• Establish a National Board for Rail Safe- field.
ty which is independent of the operational • A railway safety policy with measurable indi-
agencies to avoid conflict of interest. The cators for evaluation for a five year and ten
CEO of the Board should be of a rank of Sec- year period must be announced before the
retary to the GoI and should report directly end of 2015. The policy should cover all inju-
to the railway Minister. The Board should ries and fatalities associated with railway
be staffed by professionals who have career property.
opportunities and working conditions simi- • Reform data collection and analysis proce-
lar to professionals working in IITs/CSIR dures for traffic accidents in consonance
laboratories. It should also have an adequate with international practices at different lev-
funding mechanism. The Board will also con- els: National broad-based data, detailed sur-
duct statutory inquiries into train accidents vey systems for fatal cases, sampling systems
occurring on the Indian Railways, presently for medical data, etc.
being conducted by the Commissioner of • Establish five to 10 multidisciplinary safety
Railway Safety. Further, with the setting up of research centres at academic institutions.
the proposed Board, the institution of Com-
missioner of Railway Safety may not be nec- INADEQUATE RESEARCH & DEVELOPMENT
essary and it may be merged with the Board
(an amendment to the Railway Act would be Research & Development can be a significant source
necessary in this regard). The terms of refer- of competitive advantage. However, Indian Rail-
ence can incorporate the recommendations ways has not been on the frontier of developing or
similar to those included in the report sub- innovating railway technology. A comparison of the
mitted by the Dr. Kakodkar Committee (2012) technologies employed on IR with the best that is
on railway safety. available or in use on other railway systems shows
• Establish/strengthen Safety Departments that IR has lagged behind its peers the world over.
within operating agencies (at different There is a gap of a few decades between state-of-the
levels Railway Board, Railway Regional art technology adopted (in construction, mainte-
22. HSLRC (2012).
NTDPC | RAILWAYS 55

Box 1.20
Select Recommendations of High Level Safety Review Committee
Following are some of the key measures recommended by the Committee to improve safety:
• Independent Safety Regulation: There is no practice of independent safety regulation by an
independent agency separate from operations. A Railway Safety Authority (RSA) should be
set up as a statutory body independent of Indian Railway Board under the Government. The
Authority shall have a separate budget fully funded by the Ministry of Railways and shall be
backed by a full-fledged Secretariat. The Institution of Commissioner of Railway Safety should
be merged with RSA and should be strengthened and empowered. Role of Commissioner of
Railway safety should be withdrawn from the routine clearance of proposals from the railways
such as changes in Plans, Working Rules, etc. which consume lots of his time.
• Financial health of IR has great bearing on the safety standards. Passenger fares have not been
increased in the last decade during which many passenger carrying trains were introduced
on the existing overloaded infrastructure. This has strained the infrastructure way beyond its
limit and all the safety margins have been eaten up pushing Indian Railways to a regime of
adhocism in infrastructure maintenance. The Committee strongly recommended to stop
such practice of introduction of new trains without commensurate inputs to the infra-
structure.
• Line capacity has been severely constrained due to introduction of more and more trains over
the years. No technical aid is yet available to run trains during foggy weather which adversely
affect train operations during winter season of 2 to 3 months in northern India. The Commit-
tee recommended adopting an advanced signalling system based on continuous track
circuiting and cab signalling, similar to European train control system Level-II on the
entire trunk routes of about 19,000 route kilometres within 5 years.
• Casualties in accidents at level crossings are a matter of concern. Moreover, level crossings are
also a drag on train operation limiting line capacity. The Committee, therefore, has recom-
mended total elimination of all level crossings (manned and unmanned) within 5 years.
Construction of limited height sub-ways, Road under Bridges (RUB) and Road over Bridges
(ROB) should be taken up in mission mode and traffic blocks should be generously granted.
• With the introduction of long formation of trains running at moderately high speed of 110 to 120
kmph, it is recommended to stop production of ICF design coaches and completely switch over
to manufacture of LHB design coaches immediately.
• There is a severe shortage of well trained staff. There are several vacancies in critical safety
positions. All the vacancies of supervisors and staff in safety category should be filled up in a
time bound manner say within 6 months.
nance and operation, and different kinds of trans- Infrastructure with RDSO: Presently, RDSO has a
portation solutions such as high-speed, heavy-haul number of laboratories equipped with research and
operations) in the developed railway systems and testing facilities for development, testing and design
Indian Railways. evaluation of various railway related equipment
and materials. Although these laboratories have
At present, Research, Development and Standards achieved their limited purpose, these are not
Organisation (RDSO), Lucknow, is the sole R&D state-of-the-art. Moreover, facilities for develop-
organisation of Indian Railways. It functions as the ment of model/prototype research work and work-
technical advisor to the Railway Board, zonal rail- shops equipped to support such research work do not
ways and the production units and is entrusted with: exist at RDSO.
• Development of new and improved designs;
• Development and adoption of new technolo- Collaboration with Research and Academic
gies for use on Indian Railways; Institutions: RDSO has also forged strategic links
• Development of standards for materials and with premier technical institutions and organisa-
products specifically needed by Indian Rail- tions, such as the IIT at Kanpur, Roorkee, New Delhi
ways; and Chennai, the Defence Research and Development
• Technical investigation, statutory clearance, Organisation (DRDO), and the Central Scientific
testing and provision of consulting services; Research Organisation (CSIR). A Memorandum of
• Inspection of critical and safety items for roll- Understanding (MoU) has also been signed with IIT,
ing stock, locomotives, signals, telecommuni- Kharagpur to set up a Centre for Railway Research
cations equipment and track.

Table 1.12
Staffing Pattern of RDSO
STAFF SANCTIONED STRENGTH ACTUAL ON ROLL MODE OF RECRUITMENT
By deputation of officers from Zonal Railways/pro-

Group ‘A’ 212 192 motion from Group ‘B’
Group ‘B’ 166 140 By promotion from Group ‘C’
2,101 1,612
Group ‘C’ (Tech-1,553; Non- (Tech.1,141; RRB/Compassionate Ground
Tech.548) Non-Tech.471)
Group ‘D’ 870 505 RRC/NER & Compassionate Ground
at Kharagpur for developing next generation railway resources at the disposal of RDSO, adversely
technology for Indian Railways. affecting its R&D work.
Despite existing laboratories and strategic alliances, The High Level Safety Review Committee (2012) also
RDSO has not been able to fully achieve its objectives examined the present state of functioning of RDSO
and Indian Railways is mostly dependent on imported and noted that:
technology. RDSO’s role has largely remained restrict-
ed to facilitating adoption of imported technology by ‘Research Design and Standards Organisation, which
Indian Railways, standardisation of design specifi- is the present apex technical wing of Indian Railways,
cations and development of indigenous sources for is highly constrained due to several reasons. This has
import substitution. Some of the main factors that hampered the ability of the system to internalise
have impeded RDSO’s emergence as the R&D spear- new emerging technologies and indigenous devel-
head of IR are: opment has not progressed consistent with today’s
needs.’
• Bright and talented technical personnel with
exposure to global technological trends are Box 1.21 highlights some of the observations of the
required for research. Such technical exper- HLSRC about the present research eco-system on IR.
tise is not available with RDSO. RDSO is The major recommendations of the HSLRC on the
mainly manned by railway officers and their proposed research eco-system on IR are summarised
knowledge is limited to railway operations as in Box 1.22.
they exist. Railway officers are undoubtedly
required to bring relevant domain knowledge Recognising the role and importance of research
and clearly define research areas but beyond and technology in meeting the goals set out for IR,
that their skills are of limited use for research, the Indian Railways Vision 2020 document of
development or innovation. Table 1.12 shows Ministry of Railways noted that:
the current staffing pattern of RDSO. It shows
that the top-echelon of RDSO is manned by ‘We must establish one of the worlds’ most advanced
officers on deputation from Zonal Railways research and development capabilities for trans-
and most of the staff of RDSO is recruited at fer and indigenisation of technology and break-
relatively low-level. through innovations. For meeting these objectives,
• RDSO postings are not considered very attrac- the Research, Design and Standards Organisation
tive by many railway officers. Even the railway (RDSO), CRIS and other technical bodies of the
officers who are sent on deputation to RDSO Indian Railways would be revamped to enable them
stay there for short tenures. The limited exper- to work with clear mandates and deliverables. R&D
tise or exposure gained by them is also lost and will be integrated with the core of Railways opera-
no institutional capacity gets built. tions.’
• RDSO lacks research labs with state-of-the-art
equipment. It is also hamstrung by the govern- It further suggested that:
ment procedures in procurement of research ‘A conscious strategy to mitigate the risk of obsoles-
and testing equipment. cence and continuously stay ahead in technology race
• Workload on account of vendor development would be put in place. This would be achieved by fos-
has increased manifold in the recent past. As tering close linkage between RDSO, functional levels
a result, registration and approval of vendors of railway administration and intellectual resourc-
consumes a considerable part of the time and es at premier technology institutes like IIT and
NTDPC | RAILWAYS 57

Box 1.21
Present Research Ecosystem (Observations of High Level Safety Review
Committee)
• RDSO, in its present form, is largely discharging its role as a support organisation for opera-
tional network of Indian Railways in terms of inspection and testing, coordination between
vendors / suppliers and operational units, marginal improvement of systems / sub-systems etc.
RDSO also carries out the work of development of design and specifications of systems and sub
systems, audit of vendors and their approval and inspection of critical items related to opera-
tion and safety. There is, however, no semblance of any original research or technology develop-
ment initiative and the general style of functioning is around customisation of designs of vendors
to suit the requirements of Indian Railways.
• Poor empowerment of RDSO in forwarding the sanctioned area of work within the budgeted
amount was also brought to the notice of the committee. It was informed that RDSO was depend-
ent on zonal railways in awarding the contracts for trial projects of RDSO which cause delay.
• There is hardly any permanent cadre of scientists or officers at RDSO to carry out the R&D work.
The officers at the senior positions such as EDs, Sr EDs and Directors are drawn from the zonal
railways on deputation basis. These officers go back to the zonal railways after completion of
their term of 3 to 5 years or on promotion. RDSO-specific recruitment is done only at the subordi-
nate level on permanent basis. After converting the status of RDSO as a zonal railway, even this
recruitment has come to a halt. These subordinate employees are not able to go beyond JAG
level.
• The committee had detailed presentations and interactions on Technology Mission on Indian
Railways (TMRS). It is observed that though this was a good effort on the part of RDSO and IIT
Kanpur, the role of industry was very limited. This was perhaps due to the fact that there was no
incentive to the industry. Their efforts in association with IIT Kanpur and RDSO were not going
to be rewarded in any way as the procurement of the product was through open tender. IPR
policy of Indian Railways was not conducive for promotion of this academia-industry-railway
partnership. This led to the unwillingness of industry partners to participate actively. Thus,
despite the best intentions and reasonable success on the development front up to trial demonstra-
tion stage, the process of technology transfer could not be carried out successfully.
• It must be mentioned that a certain element of ownership and independence in railway engineer-
ing is necessary in India. If there is a tendency of over independence on suppliers and vendors
and if the equipment procured is in the form of a black-box then certainly the organisation is
at the mercy of vendors time and again. This is certainly not a safe scenario. The specifications
of the equipment as well as the technological know-how should be owned as well as controlled
firmly by Indian Railways. Development of technology as well as indigenous vendors is neces-
sary.
• In order to improve the technology of rolling stock, motive power equipment, track system and
other assets, it is essential to invest continuously in applied research and technology develop-
ment. This perspective is singularly absent in the present scenario. In case of nuclear and space
agencies, the backbone of research and development is as strong as the operational wings of
these agencies. It is because of this that the country is able to achieve a level of independence
and excellence in these areas.
NITs and research laboratories of CSIR and ister of Railways; Chairman and Members of the
DRDO along with targeted investments in R&D. Railway Board are Members of the Council. The
In 10 years’ time, IR would be transformed Council is required to interact with RDSO at period-
from a net technology importer to technology exporter.’ ic intervals. It has been, by and large, dysfunctional
and is not playing the role it was envisaged to. As
RECOMMENDATIONS suggested by the High Level Safety Review Commit-
Establish Railway Research and Development tee, the Governing Council needs to be replaced with
Council: Presently, functioning of RDSO is reviewed an apex body called ‘Railway Research and Develop-
by a Governing Council which is headed by the Min- ment Council’ (RRDC). RRDC will be chaired by an

Box 1.22
Proposed Research Ecosystem (High Level Safety Review Committee)
The High Level Safety Review Committee proposed the establishment of a new architecture of research
and development under the overall guidance of an apex body called Railway Research and Devel-
opment Council (RRDC), which is recommended to be established for this purpose.
Apart from the RRDC, the research eco-system is conceived of the following three wings:
• Research, Design & Standardisation Organisation (RDSO)
• Advanced Railway Research Institute (ARRI)
• A set of Railway Research Centres (RRCs)
Following paragraphs summarise the role of each of these:

• RRDC: The RRDC will provide overall guidance as well as resources for the railway research
eco-system in India. The council will also provide a perspective plan of research and develop-
ment in view of the safety considerations on one hand and the technological solutions on the
other hand. The RRDC will be chaired by an eminent technologist / scientist of the country
reporting to the Railway Minister. It will have three members from the Railway Board and three
members, one each from academia, research establishments, and industry associations (CII,
FICCI etc). The Director General (DG) of RDSO and the Director General of the proposed ARRI
shall also be members of RRDC.
• RDSO: Indian Railways should strengthen RDSO and make it more efficient organisation with
respect to the work of design standards, inspection, testing and technical support to zonal rail-
ways. It should be restructured and empowered to perform the assigned task. It will have link-
ages with ARRIs and RRCs. Further, the committee recommends enhancing the powers of DG/
RDSO to improve its functioning:
• Full autonomy with financial powers to function within the sanctioned budget.
• To award consultancy contracts of enhanced value up to Rs 10 million in each case against
the present delegation of Rs 3 million in each case. Powers for awarding MOU/Consultancy
Contract should also be extended to benchmarked organisations in India and abroad like
AAR, TTCI, UIC, etc.
• Full powers to award Consultancy Contract once sanctioned by the Board for values more
than Rs 10 million each and there should not be any further need of sending the proposal to
the Board.
• Full powers for placement of developmental order within lump sum Budget Grant of RDSO
irrespective of cost. This will expedite prototype and field validation for which RDSO is pres-
ently depending on PUs and Railway Board.
• ARRI: This organisation should be a high-end, research organisation focusing on engineering
challenges in railway specific areas.
• RRCs: Indian Railways should establish a string of five or so RRCs. These centers should be co-
located on the campuses of Indian technological academic institutions of national importance.
Each center should specialise in specific areas like signalling, rolling stock, motive power, track
and bridges, operations management, etc.
• Financial support up to 2 per cent of yearly revenue of Indian Railways should be available to
support the entire research eco-system of railways in India.
Source: Report of High Level Safety Review Committee, Ministry of Railways, 2012 (Kakodkar Committee)
eminent technologist/scientist, with the Chairman RRDC shall provide the perspective plan stretching
and Technical Members of the Railway Board as over a reasonable period of 10 years for research and
its members. The Director General of the proposed development needed for the Railways.
RRDI, the Director General of RDSO and 2 Directors
of the proposed Academic Centres of Excellence The budgetary provision for research and develop-
shall also be ex-officio members. It will also have ment should be adequate; 2 per cent suggested by
one representative each from the academic world the High Level Safety Review Committee can be a
and research organisations. The Chairman of RRDC benchmark. This is a must to upgrade the research
shall have a reasonably long tenure. and testing facilities available presently, as also to
provide the resources needed for the new RRDI, the
NTDPC | RAILWAYS 59

new Academic Centres of Excellence and the mod- that the number of RRCs should be scaled up to 30
ernisation of the RDSO. by 2030. These should be in the nature of full scale
research centres where faculty can interact within a
Establish Railway Research and Development sizeable group. Such centres must be of interdiscipli-
Institute (RRDI): This will be multidisciplinary nary nature and be established based on open compe-
research organisation for applied research on cur- tition among academic institutions by inviting pro-
rent concerns and future technology development posals for the same. Each centre must demonstrate
for Railways. This is in line with the recommenda- its interdisciplinary nature by ensuring that the
tions of the Dr. Kakodkar committee to establish participating scientists are drawn from two or more
an ARRI. The proposed institute should formulate departments and can be established in all academic
a Master Plan roughly every five years to articulate institutions including medical colleges.
and lay down the major research areas and activi-
ties. The institute should look at establishing inde- The RRCs should be provided grants in aid for estab-
pendent Research Wings for each of the major areas, lishment expenses, building, facilities, laboratory,
e.g. Railway Track & Structure; Locomotives; Rolling equipment etc. The level of funding would be Rs 30-50
Stock; Train Controls, Signalling and Communica- million per year per centre. In addition to equip-
tions; Information Technology; Energy Efficiency; ment, supplies, travel and research funds, the fund-
Rail Environmental Research; Safety; Railway ing must include 5-10 endowed permanent Chairs
Transport and Logistics; Railway Economics, Statis- and 10-20 endowed post-graduate scholarships. Each
tics and Data. centre must work in at least 3 research areas. Also
each major specialisation/activity of IR should be
The service conditions at RRDI should be simi- a focus research area for 2-3 RRCs this will promote
lar to those at CSIR and the Director General of interdisciplinary research and minimise academic
the institute should have rank and facilities simi- corruption and monopoly. In order to attract and
lar to those at CSIR laboratories/ Secretary to the retain the best of scientists, the RRCs should ensure
Government of India. The Director General will that their employment and service conditions match
report directly to the Minister of Railways or the the standards of DRDO and CSIR labs. The RRCs
CRB. Terms of reference would be similar to those should embrace progressive career advancement
at the IITR (as recommended in Chapter 11 on policies for its staff and provide a platform for the
Research and HumanResource Development), but scientists/researchers to rise to the highest level and
with greater emphasis for applied work as per needs head the RRCs.
and requirements of Railways. The institute should
target recruiting close to 300 researcher profession- Revamping RDSO: It is recommended that the
als (60-70 per cent permanent employees of the insti- functions of the RDSO are completely redefined
tute and 30-40 per cent on deputation) by the end of and actions initiated to revitalise and strengthen
the 13th Five Year Plan, with a healthy mix of Ph.D. it. RDSO should involve itself with only technology
degree holders, engineers, architects, professors upgradation, implementation and setting of stand-
from national and international universities, etc. ards; it should not be responsible for the inspection
The institute should also look at organising joint function. Workload relating to vendor development
researches in collaboration with various interna- can be substantially reduced by delegating it to Pro-
tional organisations. duction Units.
The RRDI should be supported by six or seven Region- The staffing policies of RDSO need a complete
al Railways Institutes, which focus on the research overhaul to induct competent technical personnel
requirements specific to their region. The head of required for research. As discussed earlier, currently
the Regional Railways Institute should report to most of the staff of RDSO is recruited at lower level
the General Manager (GM) of a zone. Each regional and the top-echelon of RDSO is manned by officers
institute should target recruiting about 100 research- on deputation from Zonal Railways. In order to build
ers within five years of their establishment. Apart the institutional capacity of RDSO it is important
from the research requirements specific to their that most of the Group A and B officers should be
region, these Regional Institutes would also com- permanent staff of RDSO. Lateral induction of high-
pete among themselves for any Request for Propos- ly qualified technical personnel at higher levels must
al (RFP) floated by the RRDI for a research area/ be allowed. Further, those from the field who have
project. flair for research should be drawn in and absorbed
in RDSO; they shall help bring in domain knowledge
Establish Academic Centres of Excellence: The too. The target should be to ensure that roughly 50
Ministry of Railways and the Ministry of Human per cent of the staff of RDSO comprises Group A
Resource Development must set up academic cen- and B officers. The recruitment of technical offic-
tres of excellence, or the Railway Research Cen- ers directly in group ‘B’ should be started urgently.
tres (RRCs), in at least 13 technical institutes (IITs, A well oriented policy for promoting capable and
RECs) and at least two IIMs by 2020. It is suggested endowed officers to group ‘A’ on assessing their per-

Box 1.23
Chinese Academy of Railway Sciences (CARS)
CARS is the only comprehensive research institute with multi-disciplines and multi-specialties in Chi-
na Railway industry. In 2002, it was transformed from a state-owned institute to an enterprise under
the direct control of MOR. Grounded in the main field of railway modernization, it has tackled con-
siderable important and critical technological problems and has made a great deal of experimental
studies focusing on railway construction and transportation. Therefore, it has gained more than 2300
scientific research achievements and 825 prizes for significant fruits of scientific research. CARS has
developed technological innovative ability and core competitiveness in railway transportation over its
existence for 60 years, and developed into an industrial group engaging in high and new technologies
of rail transport with integration of scientific research, development, production and consultation.
It has 2468 staff and workers, among whom 606 are senior research fellows, and 701 intermediate
researchers. As one of the initially approved units granting master’s and doctor’s degree, it has now
developed into a first-level doctorate degree granting institution for Traffic Engineering and Geo-
technical Engineering, 2 mobile postdoctoral centers, 6 doctoral degree programmes, and 15 master’s
degree programmes.
It has built the national railway test center, and has been equipped with over 40 laboratories of all
specialties, and 6991 test equipment. Furthermore, it has applied and established in recent years 6
state-level innovation platforms, including
• National Research Centre of System Engineering of Railway Intelligent Transport
• State Key Laboratory for Track Technology of High-Speed Railway
• National Engineering Laboratories for System Test of High-Speed Railway
• Equipment Testing Line of Urban Rail Transit
• State Key Laboratory for Traction and Control System of Locomotive and EMU
• Service Platform for Technological Innovation of High-Speed Train.
CARS is making every effort to build the academy into a first-class research institute and to contribute
more to the modernization of China Railways by focusing on research and development, and motivat-
ing both experimental tests and commercialization with innovative and enterprising spirits.
Source: http://www.railway-research.org/Chinese-Academy-of-Railway accessed on 16th December, 2013.
Box 1.24
Korea Railroad Research Institute (KRRI): Korea’s Railway Think Tank
KRRI was established in 1996 as a railway research body in Korea aimed at developing railway trans-
portation and enhancing competitiveness in the industry by unfolding strategic R&D activities along
with railway policies. KRRI was launched with commitment to shape the nation’s railway transport
systems while strengthening its competitiveness in the global railway industry. As the nation’s back-
bone research body for the railway technology, KRRI constantly seeks innovative technologies and
policies to better serve the people and nation with improved railway systems.
Over the years, KRRI has expanded its international network by signing MOU with related organisa-
tions in and outside country, and has been actively engaged in collaborative research activities with
its partners. As of November 2008, KRRI had signed MOU with 25 overseas organisations from 15 coun-
tries. It is also a member organisation of International Union of Railways (UIC) and International
Association of Public Transport (UITP). KRRI hosts annual seminar with Railway Technical Research
Institute (RTRI) of Japan and China Academy for Railway Sciences (CARS) of China where related
researchers get together to exchange their research expertise and results to develop the railway tech-
nology while forming a strong bond between the countries.
(Contd...)
NTDPC | RAILWAYS 61

The organisation of KRRI is composed of 270 regular employees, about 84 per cent out of whom consist
of researchers in various technology areas. The budget of KRRI for the year 2011 was around 90 mil-
lion USD.
As an internationally certified testing centre, KRRI is equipped with some 350 units of advanced rail-
way testing facilities in 6 laboratory buildings to conduct highly sophisticated testing and assessment
on railway related gears, rolling stock performance and diagnosis to ensure railway safety.
Source: KRRI website (http://www.krri.re.kr/); accessed May 03, 2013.
formance in field as well as in academics after 7-10 research/academic institutions and OEMs, contract-
years should be created. ed for the duration of the project. The research pro-
jects core team must not be disturbed till the end of
Investments should also be made to upgrade and the project and should have strong incentives (finan-
modernise the lab facilities of RDSO. cial as well as others) to deliver.
Presently, no procedure has been specified for taking R&D projects need to be identified based on opera-
over of patent rights from the trade. Where there is tional needs and potential investment returns.
design/technology the use of which has consider- These need to be supported through allocation of
able importance for IR, taking over of patent rights adequate resources. Clear-cut accountability for out-
becomes necessary, to avoid monopoly situation and come and timely completion would need to be estab-
from consideration of security. A procedure for tak- lished and monitored through annual performance
ing over of patent rights from the trade should be audit.
clearly spelt. This is not applicable for rolling stock
where while importing, transfer of technology with An Integrated Energy Management System needs to
rights is automatically provided for. However, the be set up under a separate directorate in the Railway
issue assumes importance for smaller items such as Board. This needs to be assisted by a multi-discipli-
for track. nary team at RDSO. Electrification on economic jus-
tification, induction of energy-efficient rolling-stock
Ministry of Railways should set up a Science & Tech- and monitoring of non-traction energy consumption
nology wing/department which will act as liaison should form part of energy management plan.
between the field staff and the Research Institutes/
RRCs, and will help in transferring knowledge to the HUMAN RESOURCES MANAGEMENT
field.
Indian Railways has the second largest workforce
Involvement of manufacturers of railway prod- under one government controlled institution any-
ucts in R&D: The upgrade and modernisation of where in the world, with nearly 1.3 million employ-
technology on IR can be realised by improvement of ees working under 13 departments, organised in
in-house R&D work and involvement of the manufac- 10 different central Group A services. The current
turers of railway products in R&D. Major manufac- structure encourages excessive departmentalism at
turers of railway products all over the world invest the management level and often leads to priorities
considerable resources in developing more produc- being set not for the organisation as a whole, but on
tive, cost-effective products and systems. They need departmental considerations.
to be involved in R&D for both new technologies as
well as for improvement of existing systems and With the continuous technological upgrade, the ratio
products. of Group ‘C’ to ‘D’ has changed from 25:75 in 1951 to
82:18 in 2010-11, indicating a shift towards induction
Setting up of new units with participation of of larger number of skilled manpower. However, a
private-sector would also be useful in ensuring sizeable number of unskilled group ‘D’ staff is still
technological upgrade. being inducted into the railways. Further, IR recruits
about 20,000 staff in Group ‘C’ & ‘D’ category annual-
Result-oriented research teams should be set up to ly on a compassionate basis. Such staff are not com-
work on specified research projects. Such teams may parable, skill or merit wise, to those recruited by an
include participants from outside IR, including from open competition. No other department of the GoI

Table 1.13
IR Employees (as on March 2011)
CATEGORY NUMBER (IN THOUSANDS) PERCENTAGE
Group ‘A’ & ‘B’ 17 1
Group ‘C’ 1,077 81
Group ‘D’ 235 18
Total 1,328 100
Source: Indian Railways Yearbook 2010-11, Ministry of Railways.
does such massive appointments on compassionate neering Services Examination and the Special Class
grounds. Railway Apprentices Examination.
HR functions in the Indian Railways have tradition- What are now 10 structured Group A services were
ally evolved in the context of its being in the gov- originally 3 to start with in 1926; Gopal Krishna
ernment. HR policies and practices on IR are for Gokhale raised the issue of Indians being given man-
the most part attuned to policies of Government agement positions in the Railways in the Imperial
of India. There is no flexibility in terms of pay and Legislative Assembly in 1910 and his effort fructi-
rewards as these are determined by Pay Commission fied 14 years later with the Secretary of State giving
set up periodically by the government of India. sanction during the year 1926-27. In course of time,
additional services were created for Accounts, Sig-
Recruitment of staff in Groups ‘C’ & ‘D’ is done nal & Telecommunication, Electrical, Stores, Medi-
through the Railway Service Commissions located at cal, Personnel and Security at different times, taking
several centers and to which the zonal railways and the total to 10.
production units are attached; the zonal railways
and production units too recruit staff such as on Rail transport has two characteristics: a severely
compassion grounds and for Group ‘D’. guided mode, and with controlled access. This, in
turn, makes multidisciplinary inputs a must for its
The recruitment to the management cadre (Group A output. When the entire organisation is owned and
officers) is done through Department of Personnel & managed by the GoI, proliferation of services is a
Training (DoPT) and Union Public Service Commis- natural outcome.
sion (UPSC). The UPSC as of now holds three differ-
ent examinations for this purpose viz.: This is the root cause of the ‘departmentalism’ in the
• Civil Service Examination for Indian Rail- IR at the management level.
way Traffic Service (IRTS), Indian Railway
Accounts Service (IRAS), Indian Railway Per- Presently, the HR function is mostly confined to the
sonnel Service (IRPS), and Security Service; traditional role of recruitment, training and estab-
• Central Engineering Services Examina- lishment matters. Though the Railway Board has
tion for Indian Railway Service of Engineers the authority and power to attune recruitment and
(IRSE), Indian Railway Service of Electrical training to job requirements (in terms of skills,
Engineers (IRSEE), Indian Railway Service of performance appraisal, rewards and incentives),
Mechanical Engineers (IRSME), Indian Rail- there is hardly any effort or interest or institution-
way Service of Signal Engineers (IRSSE), and al mechanism to achieve continuous improvement
Indian Railway Stores Service (IRSS); in HR practices, either at the Ministry’s level or at
• Special Class Railway Apprentices Exami- the zonal level. A constant effort to review initial
nation for selecting candidates to the under- recruitment qualifications and upgrade training
graduate programme in Mechanical Engi- modules to reflect the changing needs for Group C
neering at the Jamalpur Institute. staff is totally absent. And, as mentioned above, com-
passionate appointments done on a large scale make
The above does not include recruitment of doctors the situation worse. Of the multiple departments
to the Indian Railway Medical Service for which a and services in IR, some manage these HR activities
separate examination is held by the UPSC. Inclusive themselves without involving the Personnel depart-
of this, there are 10 structured services. Ministry of ment at Divisional/Zonal or Railway Board level.
Railways is the nodal ministry for the Central Engi- In an earlier era, Railways could attract talent by
NTDPC | RAILWAYS 63

the mere fact that it was one of the few industries ways staff. This post-graduate training may
in the country and railway jobs offered the security be carried out at the proposed Railway Insti-
and the prestige of government service. However, to tute/University or other designated reputed
attract, nurture and retain talent in large numbers academic institutions in India or abroad.
for growth in future, IR has to take a close look at its • The Railway Engineering degree will encom-
HR policies and practices. pass, inter-alia, all aspects of engineering
- civil, mechanical, electrical, signalling and
This is particularly important in view of the large telecom, etc. - so that the officers have a holis-
capacity expansion that is envisaged and the mod- tic approach to the railway related issues.
ernisation that is necessary in all aspects of rail- • The Logistics course will prepare the candi-
ways’ operations. dates for railway accounting, railway opera-
tions, ratings, human resource development.
RECOMMENDATIONS It could be in the form of an MBA or an MA.
HR management would be critical to achieving the • After successful completion of their course
challenging goals set for IR for 2032. HR reform the officers will spend one year as probation-
should proceed hand in hand with the organisation- ers in the field applying their knowledge to
al reforms. It is imperative that the ‘departmental’ actual real-time situations - in a way learning
character is rectified so as to enable the organisa- the ropes of managing the day to day working.
tion to deliver on its promises and meet the expecta- • The training institute where the Masters
tions of the people. The focus should be on building course would be imparted should get con-
skills and promoting and incentivising excellence at verted into a Railway University of interna-
all levels. HR reforms that are carried out will need tional standard, where railway research can
to be consistent with the proposed future corporate be undertaken and PhD degrees awarded. It
structure envisaged in the organisational reform of should become a centre for excellence attract-
Indian Railways. ing talent from every nook and corner.
• Once this process of initial recruitment is put
The NTDPC has discussed the HR reforms of IR in place, we can create a superior manage-
extensively and at different times. There is a con- rial cadre of leaders at the time of granting
sensus on the need to significantly rationalise the Selection Grade i.e., in the 14th year of service.
existing multiple services and cadres of railways. These officers can be selected by a process
However, as on some other issues, there were some of assessment at the UPSC. The leaders so
differences in views with regard to how radical the selected will man the posts of Additional Divi-
HR eforms should be. The incremental view suggests sional Railway Managers, Divisional Railway
that the reorganisation may be into seven cadres Managers, Chief Vigilance Officers, General
rather than two as recommended below. This view in Managers, etc. In this arrangement the Man-
favour of seven cadres is provided in full as Annex agers will have long stints unlike today when
1.4 to this chapter. the DRMs remain in the chair only for two
years and the organisation suffers the conse-
Following are the recommendations to reform the quences of frequent changes, lack of direc-
HR practices of IR: tion and cohesion at the divisional level. This
• The recruitment to the railway cadres of offic- will undoubtedly benefit the organisation and
ers should be totally dissociated from the Civil a sense of direction, focus will be inculcated.
Services and Central Engineering Services This process will continue for a period of 3 to
exam. The Special Class Railway Apprentice 5 years, in preparation of the corporatisation
(SCRA) exam should be upgraded to recruit and reform of Indian Railways.
candidates, who are already graduates, to two • Recruitment of highly qualified PhDs from
streams of Railway Service viz. Indian Rail- IIMs/IITs and other science and engineering
way Technical Service and Indian Railway institutions in India and abroad should be
Logistics Service. This will also facilitate the encouraged for specialist functions.
organisational reforms proposed. • Lateral recruitment from the market for jobs
• The age limit for this exam should be 21 to 25 in R&D, marketing, finance and HR should be
years with three attempts at the competition considered. IR needs to transform into a smart
(at the most). organisation through a constant process of
• On selection, the candidates should be admit- technological upgrade and stress on customer
ted to professional post-graduate level courses focused growth. This requires that personnel
of two years duration, on completion of which at all levels are recruited and trained with a
they should be awarded suitable Masters view to building skills and attitudes required
degree in Railway Engineering, Transport for attainment of the organisational goals;
logistics or other relevant disciplines includ- • Induction of unskilled staff must be reduced
ing finance and management. This would help and eventually eliminated altogether.
in upgrading the technical capacity of rail- • The recruitment process has to be supple-

Box 1.25
Human Resource Management
• Install and operationalise immediately modern Computerised Human Resource Management

System with data base and inventory/Resume of all present employees and skills required to
meet modernisation plan.
• Reduce and gradually eliminate induction of unskilled staff
• Create and impart specialised courses in partnership with academic institutions and others
especially for Vocational Education, Supervisors and Management
• Launch a series of in-service training programmes immediately
• Rationalise and consolidate multiple services and cadres without sacrificing the benefit of spe-
cialisation and business capabilities
• Offer graduate programmes in Railway technology at IITs and Railway management at IIMs
• Enable lateral recruitment from market for specialist functions
• Upgrade ICT skills of present officers and employees substantially
• Review and Restructure existing training institutions for improving ecosystem and
Modernisation
• Review Railway Health System separately to meet aspirations of Railway Families and Mod-
ernisation plans
• Create a system of reward for collective performance and variable pay linked to incremental
surplus generated by various units
Source: Report of the Expert Group for Modernisation of Indian Railways, Ministry of Railways, 2012.
mented by well researched and meticulously alongside the track in longitudinal strips but there
developed induction and in service training are some pockets around railway stations and rail-
to constantly upgrade the skills of employees. way colonies also. To keep a proper account of the
The National Academy of Indian Railways land resources, an exercise for identification of the
(formerly known as the Railway Staff Col- vacant land and systematisation of records has been
lege) should be upgraded the property and undertaken. Vacant land is primarily meant to meet
its facilities should be expanded to thrice its developmental needs such as doubling, yard mode-
current size. IR needs to work closely with ling, traffic facility works and manufacturing facili-
academic institutions to devise and impart ties (for various rolling stock and other components
specialised courses, curricula and diplomas. required by railways). If the land is not required for
Skilled workers and supervisors, recruited operational needs, it can be developed commercially
and trained this way would be able to meet the by Railway Land Development Authority (RLDA)
challenges of absorbing new technology and created specifically by an Act of Parliament, to gen-
business orientation as IR rapidly modernises erate additional non-tariff revenue for railways.
and upgrades its systems.
In future, railways would need to use its exist-
Modernisation of HR practices must happen and ing vacant land scrupulously. It would also need to
some principles regarding necessary changes have acquire land for various developmental projects
been laid down by Expert Group for Modernisation such dedicated freight corridors, high speed pas-
of Indian Railways (Box 1.25). senger corridors, new lines and doubling projects
as well as for major manufacturing units and multi-
OPTIMISATION OF LAND USE modal logistics hubs. In most cases, the requirement
of land would be to connect places in a linear fashion
Land is a critical and scarce resource and is getting and there would be little flexibility to vary the align-
scarcer as demands on the available land mounts ment due to technical constraints like the radius
due to the pressure of population and development. of curvature, gradients, soil characteristics, river
A proper policy framework is required to preserve crossing etc. It may always not be possible to avoid
the land already available with railways and to mini- agricultural land, forest land or tribal land. However,
mise the requirement of land in future. as construction of railway lines requires only small
strips of land, the hardship and physical dislocation
Roughly 10 per cent of the total land under the pos- to the land-losers can be minimised. Wherever pos-
session of Indian Railways is vacant (estimated at sible, a detour could be taken or alignment changed
approximately 4,300 hectares). These are mostly and taken through tunnels. At some places, retaining
NTDPC | RAILWAYS 65

As construction of railway lines requires the use of land. Adequate research and cost benefit
only small strips of land, the hardships and analysis need to be carried out on these aspects.
physical dislocation of the land losers can be
Redesign and redevelopment of suburban sta-
minimised. Wherever possible, a detour could tions: Suburban stations provide an excellent oppor-
be taken or alignment changed and taken tunity for management of the precious land resourc-
through tunnels. es of Railways in urban areas. A standard template
can be developed for redesign and redevelopment of
the stations that maximises the comfort for commut-
ers and create space for premium retail in station
walls and breast walls can also minimise the land premises.
requirements. This would also help the environment
as higher earthwork fillings and deeper cuttings not It must be ensured that the resources mobilised
only use more land, but also disturb the environ- through commercial exploitation of land should not
ment through increased earthwork by borrowing or be utilised for non-remunerative/uneconomical social
dumping. projects. These resources may be parked in a special
fund to be utilised for modernisation initiatives of IR
Acquisition of the minimum land required for rail- (e.g. modernisation fund as proposed by the Expert
way projects would be inevitable. In order to speed Group for Modernisation of Indian Railways, head-
up the process, Ministry of Railways had enacted ed by Dr. Sam Pitroda).
Railway (Amendment) Act, 2008 through an Act of
Parliament. This Act provides for speedy acquisition INFORMATION AND COMMUNICATION
of land for ‘special railway projects’ by nominating TECHNOLOGY (ICT)
a ‘Competent Authority’ by Railways without resort-
ing to Land Acquisition Act under which acquisition Indian Railways is one of the country’s earliest
is done through land acquisition officers of State pioneers in leveraging the power of information
Governments. Provisions of NRRP 2007 for rehabili- technology. Passenger Reservation System (PRS) is
tation and resettlement of affected persons in a fair a highly successful example of use of information
and equitable manner have been embodied in the technology. Over the years, information technology
new Act. However, for speedier implementation of also has been used for other passenger and customer
infrastructure projects, the land acquisition process related services such as Unreserved Ticketing Sys-
has to be based on fair compensation and consent of tem (UTS) and Freight Operations and Information
land-losers to the maximum extent. This, however, System (FOIS).
lies in the realm of amendment to the Land Acquisi-
tion Act for the country as a whole. However, system-wide use of IT has remained par-
tial and incomplete. There is a sizeable amount of
RECOMMENDATIONS work needed to enable IT based solutions across
Infrastructure Corridors: Several countries have business units. The development of compatible
followed the concept of infrastructure corridors to interfaces with the regional railway networks and
optimise use of land and avoid haphazard develop- major transport generating entities like ports,
ment along these corridors. In our country also, no mines, etc., and the issues of uniformity of data
development is permitted within 67 metres on either formats, development of ICT standards and proto-
side of the national highways or 30 metres of the cols also need attention. Use of information tech-
railway alignment. Similar restrictions exist for nology (IT) can play an increasingly important role
high-tension lines and petroleum pipelines also. It in managing IR’s huge network, infrastructure and
is suggested that suitable directives be established assets. It will not only help improve efficiency and
whereby whenever a new transport infrastructure - customer services, thereby contribute towards the
rail or highway - is built, the corridor must provide goal of enhancing rail’s share in the total transport,
for segments of the infrastructure, i.e., if a new port but also can play a transformative role in railways.
comes up, the rail connectivity must be in a corri-
dor that also provides for highway, power lines, com- In order to reap the benefits of a single uniform IT
bined terminals, etc. solution that runs across Indian Railways, we must
look at structural/organisational needs along with
Schedule of Dimension (SOD) and Maximum business processes and the currently available tech-
Moving Dimension (MMD) improvement: Appro- nology to create a holistic system. Currently, the
priate investments in track structure and SOD/ Computer and Information Systems (C&IS) Direc-
MMD improvement (by systematically identifying torate in the Railway Board plays the role of a CIO
constraining structures and standards and improv- within the Railways. The Directorate is supported
ing them) can potentially enhance the carrying by a specialised institution called Centre for Rail-
capacity of existing lines and obviate the need for way Information Systems (CRIS) which is respon-
multiple lines and thereby conserve and economise sible for developing, implementing and maintain-

ing ICT applications under a dynamic operational Ideally, IR’s business strategy should be the
environment. At the zonal railway level, there is starting point for identifying the focus areas
an exclusive organisational arrangment for imple- to be IT-enabled to ensure synchronisation
menting and maintaining ICT applications in
operational and commercial areas. There is a need and cohesion among project teams.
to strengthen the C&I S Directorate at the Railway
Board to prepare an enterprise-wide Master Plan
for ICT application.
Office Automation.
There is also room for improving the way the IT • A comprehensive HR management system
projects are conceived, prioritised and executed. should be developed to better manage HR
Most of the IT projects are driven by the respec- processes and costs as well as to allow proper
tive departments. Different IT solutions developed tracking of skills and to gain improved effi-
by different departments or divisions function ciencies by assigning the right people to the
as islands of information and do not interact right jobs. Such a system should also main-
with each other because there is no common plat- tain an updated record of leave and entitle-
form or set of standards for information exchange. ments, making HR management efficient and
This is, therefore, a fragmented process without a effective.
single, strategic, and overarching roadmap driv-
en by business objectives. Ideally, IR’s business c. Long Range Decision Support System
strategy should be the starting-point for identify- (LRDSS) Project:
ing the focus areas to be IT-enabled. This approach • LRDSS has become obsolete and the new ver-
would ensure that there is built-in synchronisation sion has not yet been developed. CRIS has the
and cohesions among different respective project capability to develop the required software,
teams which function with a clearly defined pur- dovetailing the same with the operational
pose. Enterprise-wide integration will provide addi- data available with them. This tool can then
tional benefits because there will be greater uni- be gainfully used both for long range decision
formity in data formats which will permit greater making as also for operational decision sup-
interoperability and facilitate seamless exchange port on a day-to-day basis. As such, the LRDSS
of information. project should be housed with CRIS.
RECOMMENDATIONS d. A Comprehensive IT security framework

Given that there will be large benefits from intro- should be developed.
ducing ICT solutions, we recommend that there be
intensive implementation of ICT as soon as possi- INTERNATIONAL RAIL LINKAGE
ble. A summary of the major recommendations for
enablement of ICT in Indian Railways is provided Integrated transport systems at the regional level
below. These recommendations have been discussed are considered crucial to facilitate regional integra-
in detail in Chapter 10 (Potential of Information and tion and sustain the pace of economic growth in the
Communication Technology to Enhance Transport region. Rail connectivity with neighbouring coun-
Effciency). tries will foster increased economic cooperation
among them and will yield not only economic but
a. Institutional and Capacity Building also social, political and diplomatic dividends.
• Computer and Information Systems (C&IS)
directorate at the Railway Board be greatly In the Indian context, rail connectivity to the neigh-
enhanced as to encompass the entire gamut of bouring countries in the SAARC region and Myan-
ICT applications on the network; mar is important both from the economic and stra-
• Centre for Railway Information Systems tegic standpoints. India is the largest member of the
(CRIS) be converted from a society to a non- SAARC with 51 per cent of the surface area and 71
profit company with much greater freedom; per cent of population. It accounts for an even big-
• Organisation(s) for operationalising ICT ger share of the rail network. Of the eight SAARC
applications at field level be converted into countries, Maldives and Afghanistan have not been
autonomous bodies; considered for direct rail connectivity with India at
• IR Institute of Transport Management this stage due to geographical and political reasons.
(IRITM) be entrusted with the task of human
resource development Present state of rail connectivity with neigh-
bours: Table 1.14 summarises the current country-
b. ICT solutions/interventions: wise status for SAARC and Myanmar (refer Annex
• ICT solutions/interventions should be devel- 1.5 for details). Historically, the rail network of the
oped for Demand Forecasting, Scheduling, region prior to independence and partition consti-
Procurement and Contract Handling, and tuted an organic system. However, in the post-inde-
NTDPC | RAILWAYS 67

Table 1.14
Summary of Present Status of Rail Connectivity
COUNTRY STATUS OF RAIL CONNECTIVITY
• At present, railway systems of India and Bangladesh are linked to each other at five points.
• Three BG links are currently open for freight trains. The other two links, though in existence,
Bangladesh lie dormant at present.
• A bi-weekly passenger train also runs between Kolkata and Dhaka.
• Two BG links (Attari-Wagha and Munabao-Khokhrapar) are operational.

Pakistan • Attari- Wagha route is used to run both freight and passenger services.
• A weekly passenger service runs through Munabao- Khokhrapar.
• In 2004, an ICD which also serves as a rail terminal for bulk traffic was operationalised at Birgunj and
connected to Raxaul on the IR network through a new 6-km long BG line. It deals with both inbound and
outbound bilateral traffic from and to India and third country traffic through Kolkata and Haldia ports.
Nepal • Survey for five other rail connections between the two countries has been conducted. Ministry of Exter-
nal Affairs has decided to fund two of these (Jaynagar- Bardibas and the Biratnagar –Jogbani lines).
• These have been sanctioned and taken up by IR for execution.
• Bhutan does not have a railhead and is dependent on the stations on New Jalpaiguri-Guwahati BG line for
its rail transportation.
Bhutan • GoI has commissioned studies for five connections to Bhutan. Of the five, Hasimara-Phuentsoling line
which will connect Bhutan to the India Railways BG network has been proposed for construction.
• Myanmar constitutes the crucial missing link or land-bridge between India and South-East Asia.
• Rail linkages envisaged in the Trans Asian Railway project includes connections to Moreh in Myanmar
Myanmar from Jiribam in Manipur via Imphal.
• At present, work is progressing on the construction of a new line between Jiribam and Imphal.
• India and Sri Lanka are separated by sea and there is no physical connection between the two railway
Sri Lanka systems.
pendence and post-partition period, rail systems of and provide for solutions to the challenges posed by
South Asia have developed in the national context the Chinese initiatives in the region.
with little consideration for cross-border connectiv-
ity and interoperability or compatibility/uniformity RECOMMENDATIONS
of standards in infrastructure and equipment. a) It is recommended that Indian Railways
should give top-most priority to the projects
Regional and multilateral initiatives for cross to be taken up with Nepal and Bangladesh
border rail connectivity: Present state of rail (Table 1.15). Annex 1.8 provides the details of
connectivity with neighbours: Both SAARC and the railway projects that need to be taken up
United Nations Economic and Social Commission for with other neighboring countries. Further,
Asia and Pacific (UNESCAP) have attempted to draw India should take lead in opearationalising
a roadmap for regional and international rail con- the southern corridor of the Trans Asian
nectivity in the context of SAARC and Asian region Railway (TAR) project:
respectively. These are summarised in Annex 1.6. • Connection from Jiribam in Manipur to
Tamu in Myanmar via Imphal and Moreh
Trans-continental rail connectivity as a strategic should be expedited.
tool is being deployed to great effect by China. It • The existing 201-km MG line from Lumding
has already developed transport links to the Korean in Assam to Jiribam needs to be converted
peninsula, South-east Asia, Myanmar, Pakistan and to Board Gauge at the earliest (this is a
Afghanistan. It is developing extensive multi-modal sanctioned work at a cost of Rs 41 billion;
connectivity in India’s neighborhood which is per- work on formation, etc. is in progress and
ceived in strategic circles as an act of encirclement. the work is likely to be completed in 2015).
It has established a presence in Pakistan with a • The line from Imphal to Jiribam (97.9 km)
new port at Gwadar and strategic linkages through sanctioned at a cost of Rs 25 billion needs
Pakistan, Iran and Central Asia. China’s initiatives to be completed in a fixed time schedule.
in expanding its rail connectivity beyond its own Jiribam and Moreh need to be linked to
geographical borders have been discussed in detail Imphal.
in Annex 1.7 because of its overarching strategic as • Connection from Imphal to Tamu (85 km)
well as political significance for our country. In order also needs to be taken up.
to secure our strategic interests in the region, look- • Mahishasan (India)-Shahbazpur (Bangla-
ing at rail linkages beyond the country’s borders is desh) rail link needs to be rehabilitated
not merely an option but a compulsion. Our long- and restored.
term transport policy, therefore, has to take note of

Table 1.15
Rail Connectivity Projects to be Taken Up with Nepal and Bangladesh
COUNTRY STATUS OF RAIL CONNECTIVITY
• The old links between the two countries need to be restored for the sake of the development of India’s
north-eastern states as well as for the sake of better relations with our most populous neighbour. These
would include: Haldibari (India) - Chilahati (Bangladesh), Gitaldaha (India)-Mughalhat (Bangladesh), Agar-
tala (India)-Akhaura (Bangladesh) and Shahbazpur (Bangladesh)-Mahishasan (India).
• Radhikapur (India) - Birol (Bangladesh) line needs to be reopened to facilitate transit trade between
Bangladesh Bangladesh and Nepal through India.
• Haldibari-Chilahati link needs to be restored for trade between Bangladesh and Bhutan through the
Indian Territory.
• Agartala (India)-Akhoura (Bangladesh) connection needs to be re-established to provide the much-need-
ed direct rail link to states like Tripura, Mizoram and Manipur to Chittagong port.
• Jaynagar–Bardibas (69.10 km) and Jogbani–Biratnagar (18.6 km) lines costing Rs 4.7 billion and Rs 2.1
billion respectively and being entirely funded by the government of India should be expedited.
• Nepalganj Road-Nepalganj (12.11 km), Nautanwa-Bhairahwaha (15.30 km) and New Jalpaiguri-Kakrabit-
ta (46.30 km), which have also been surveyed, should be taken up by the Government of India.
• Rail connectivity with Nepal assumes special importance in view of the China factor discussed earlier.
Nepal China is planning a rail line between Lhasa and Kathmandu. Strategically, it would be in India’s interest to
construct the Birganj-Kathmandu line (160 km). The cost of this line as estimated by Pipavav Rail Corpo-
ration Ltd. (PRCL) is Rs 12.85 billion (2006). This project admittedly will not be financially viable but it
will be in India’s strategic interest to undertake the project at its cost if it has to preserve its preeminence
in Nepal.
b) Improvements in rail connectivity with to a trilateral or multilateral agreement

neighbouring countries required on diplo- for such through intra-regional rail move-
matic and political considerations should be ments.
fully funded by the exchequer. • Measures like visa-free travel between
countries, single-point customs and immi-
c) Customs and border-crossing: Facilitation gration checks, etc. are also required
Aspects to usher in a regime that will facilitate
• In order to reap full benefits of the rail seamless transportation across countries.
connectivity across countries, in addition
to integration of physical infrastructure ENERGY CONSERVATION
such as roads, railway lines, and agreed
routes, etc., a mutually agreed regulatory Energy constitutes roughly 24 per cent of the work-
framework for harmonisation of docu- ing expenses of Indian Railways. IR accounts for
mentation and customs procedures and close to 2.3 per cent of the country’s total electric-
the harmonised use of electronic data ity consumption (for example, IR utilised more than
interchange (EDI) is also required. Elec- 16 billion kilowatt-hour (kWhr) electricity in 2010-
tronic data exchange under a synchro- 11 out of the total estimated electricity consump-
nised system needs to be evolved to enable tion of 694 billion kWhr23). Therefore, it is impera-
expeditious clearance at the border. tive that IR follows a proactive energy management
• Inter-country connectivity for trade, tran- and energy efficiency policy to reduce its energy
sit and trans-shipment should be able to consumption in both the traction and non-traction
seamlessly use more than one means of systems.
transportation: air, water (sea and/or
river), rail or road. Simplified procedures IR’s energy consumption has been increasing over
like through-bill-of-lading or combined- the years. During the period 2004-09, electricity con-
transport-bill-of-lading can be introduced sumption for traction and non-traction has increased
to facilitate this. by 21 per cent and 14 per cent respectively. In the
• Inter-change of rail traffic between India same period, total GTKMs hauled by electric locomo-
Pakistan, Bangladesh, and Nepal is gov- tives increased by 29 per cent. Increase in electricity
erned under the bilateral agreements. consumption can be attributed to increase in traffic
Bilateral agreements need to be reviewed and general services electrical loads. Similarly, die-
for operationalising all such intra-region- sel consumption for traction and non-traction pur-
al corridors that would carry third coun- poses has increased by 11 per cent and 35 per cent
try traffic and transit across another respectively during the same period, while the total
country on its rail network. The current GTKMs hauled by diesel locomotives increased by 16
bilateral agreements have to be revised per cent. The high growth rate of diesel consump-
23. Ministry of Statistics and Programme Implementation (2012).
NTDPC | RAILWAYS 69

Table 1.16
Quantity of Fuel/Energy Consumed (2010-11)
FOR OTHER THAN TRACTION PURPOSES
FOR TRACTION (INCLUDING MANUFACTURING UNITS)
Electricity 13,621 2,484
(Million kWhr)
HSD Oil 2,523 44
(Million litres)
Coal 0.001 0.001
(Million tonnes)
Source: Indian Railways Year Book (2010-11), Ministry of Railways.
Figure 1.28
Comparison of Unit Cost for Electricity and Diesel (2004-05 to 2008-09)
45
40
35
30 Unit Cost/Diesel
(Rs/Litre)
25
Unit Cost
20 Unit Cost/Electric
(Rs/KWH)
15
10
5
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEAR
Source: Ministry of Railways.
tion for non-traction purposes indicates the scope ANALYSIS OF ENERGY CONSUMPTION STATISTICS FOR
for substituting diesel generators with renewable TRACTION
energy sources. On the IR, electric traction accounts for a larger
share of freight traffic while for passenger traffic
Table 1.16 shows the quantity of fuel and energy con- the share of diesel traction is slightly higher than
sumed by IR for traction and non-traction purposes electric traction. During the period 2004-09, electric
for the year 2010-11. The electricity consumption for locomotives hauled approximately 63 per cent of
traction and non-traction stood at 13.6 billion kWhr the total freight traffic and 46 per cent of the pas-
and 2.5 billion kWhr respectively at a total estimated senger traffic. During the same period, passenger
cost of Rs 65 billion. The diesel oil consumption for and freight GTKMs carried by electric locomotives
traction and non-traction purposes was 2,523 and 44 increased by 27 per cent and 29 per cent respective-
million litres respectively. ly, while the passenger and freight GTKMs carried
by diesel locomotives increased by 17 per cent and
Figure 1.28 shows the growth in unit cost of elec- 15 per cent respectively. The larger share of traffic
tric energy and diesel oil during the period 2004-09. movement by electric traction is on account of addi-
While electricity prices have remained stable, the tion of electrified routes and a higher traffic growth
diesel prices have risen steeply. The unit cost of die- rate on the existing electrified sections, which are
sel has increased by 44 per cent and the total diesel mostly the dense traffic routes of IR. As of March
oil bill by 61 per cent during the period. Electricity 2011, more than 30 per cent of total route km and 41
tariff, on the other hand, has remained fairly stable per cent of total running track km, have been elec-
and increased by only 4.4 per cent during the period trified24. Diesel traction covers routes with relatively
2004-09. The steep rise in unit cost of diesel is expect- lighter density of traffic.
ed to continue in future.
24. Ministry of Railways (2010–11).

Table 1.17
Average Energy Consumption (in Kilowatt-hour) per 1,000 GTKM
TYPE OF TRAFFIC 2004-05 2005-06 2006-07 2007-08 2008-09
Passenger 19.2 18.6 19.2 18.9 19.4
Freight 8.5 8.2 7.9 7.7 7.3
Suburban 37.4 37.7 37.9 38.1 36.9
Kolkata Metro 74.1 75.3 74.0 73.5 73.5
Source: ASS (2004-09); Indian Railways Year Book (2004-09)
Table 1.18
Average Diesel Fuel Consumed (in Litres) per 1,000 GTKM
TYPE OF TRAFFIC 2004-05 2005-06 2006-07 2007-08 2008-09
Passenger 4.5 4.3 4.2 4.0 4.0
Freight 2.6 2.6 2.6 2.5 2.4
Suburban 5.4 5.4 5.3 4.9 5.0
Source: Indian Railways Year Book (2004-09).
TRENDS IN TRACTION ENERGY EFFICIENCY in the range of 35-40 per cent. The project
Energy efficiency of electric and diesel traction has is expected to result in annual reduction of
been summarised in Tables 1.17 and 1.18. Energy approximately 100,000 tonnes of CO2 emis-
efficiency in traction is expressed as: (a) electric sions and has been developed in association
energy consumed per 1,000 GTKM for electric trac- with World Bank for registration under Clean
tion, i.e., specific energy consumption (SEC); and Development Mechanism (CDM) to claim car-
(b) quantity of diesel consumed per 1,000 GTKM for bon credits.
diesel traction, i.e. specific fuel consumption (SFC).
The noteworthy trends are a 14 per cent cumulative • Energy efficient electric locos: The pro-
SEC reduction in freight and 11 per cent cumula- duction of three-phase electric locomotives is
tive SFC reduction in passenger operations during being stepped up progressively and all electric
2004-09. Table 1.16 shows the need for upgrading the locomotives to be manufactured from 2012-13
coaches of the Kolkata Metro to the technology level onwards will be three-phase. These locomo-
obtained elsewhere. tives operate at near unity power factor and
are capable of regenerative braking which
Figure 1.29 shows a comparison of cost of electric enables an energy saving of 15 per cent in
energy with fuel cost (per 1,000 freight GTKM), by freight and 20 per cent in passenger opera-
integrating the energy/fuel tariff data and the SEC/ tions. Besides, WAP7 locos are being provid-
SFC data. ed with 2 x 500 KVA hotel load converter to
take care of train power supply. This system,
STEPS UNDERTAKEN FOR ENERGY CONSERVATION referred to as Head On Generation (HOG),
IR has constantly endeavoured to improve the energy offers 92 per cent efficiency and is superior
and environment aspects of rail transport and has to the 60 per cent efficiency in self-generation
undertaken various energy conservation measures and 81 per cent in end-on-generation. The
over the years which have helped bring down its car- HOG system will eliminate the need for power
bon footprint. Some of the energy saving measures cars and their replacement by passenger car-
implemented by IR are detailed below: rying coaches. Further, several improvements
have been implemented on conventional elec-
a. Energy saving measures in traction tric locomotives for achieving reliability as
• Energy efficient EMUs: The new three- well as energy conservation.
phase EMUs provided on Mumbai suburban
sections are capable of regenerative braking • Adoption of 2x25kV system for heavy traf-
and have an aerodynamic profile. Regenera- fic density routes: 2x25kV system was imple-
tive braking has enabled energy savings mented on the South Eastern and West Cen-
NTDPC | RAILWAYS 71

Figure 1.29
Energy/ Fuel Cost per 1,000 GTKM for Freight Services
90
80
70 Diesel
Cost (in Rs) per 1,000 GTKM
60
Electric
50
40
30
20
10
0
2004-05 2005-06 2006-07 2007-08 2008-09
YEAR
Source: Ministry of Railways.
tral Railway as a pilot project. This technology ic profile and adoption of best available know-
has now been accepted as the only option how so that maximum usable dimensions in
for hauling heavier trailing loads at higher terms of double-decker coaches or optimally
speeds. It offers several advantages, such as designed wagons can be pressed into service,
increased Traction Sub Station spacing and with minimum investment on infrastructure.
reduced EMI. The cost of rail transportation
is reduced due to the economy afforded by the • Energy-efficient practices in operations and
system in railway electrification. The reduc- maintenance: Introduction of improved
tion in number of TSSs also results in lower- operation and maintenance policies/practices
ing of cumulative maximum demand charges. has helped to conserve energy and fuel. Some
of the notable steps in this regard include:
• Fuel efficient diesel locos: In order to reduce increased interval of schedule inspections of
the consumption of fuel in diesel traction sev- locos; centralised monitoring of light engine
eral new projects have been taken up, e.g. dis- working; enforcement of instructions that
tributed power system to eliminate the need locos which are idling or are expected to idle
for reversal; HOG; CNG powered DEMUs; and for more than 30 minutes to be shut down;
use of B10 blend of bio-diesel on diesel locos. near elimination of movement of dead elec-
IR has also taken a number of direct meas- tric locomotives; loco pilots being provided
ures to reduce the SFC. Through continuous with detailed guidance on energy/fuel effi-
design improvements, SFC of locomotives has cient driving as the potential for energy sav-
been brought down from the initial value of ing in this area is 5-8 per cent; reduction of
3.3 to 2.5, i.e., a reduction of 25 per cent (it is empty wagon movements; extension of the
expected to be brought down to 2.25 by 2015). maintenance interval of freight stock; move-
Further, new features such as intelligent low ment of double stack containers on the west-
idle, automatic engine start-stop (AESS) and ern corridor; and popular passenger services
auxiliary power unit (APU) are being tried with high demand augmented to 24 coaches
out. Besides, the production of fuel-efficient after upgrading the requisite facilities at plat-
EMD locomotives has been stepped up with forms and terminals en-route. In addition,
plans for a complete switchover to this class there are plans to make feeder routes of DFCs
of locomotive in the near future. and other identified routes on the network fit
for 25-tonne axle load. This would improve the
• Energy efficient wagons and coaches: IR has load per train from the existing level of less
improved the payload-to-tare weight ratio than 5,000 tonnes to 6,000 tonnes in future.
of wagons by using lighter weight materials
such as stainless steel and aluminum. Light- b. Energy saving measures in non-traction
weight stainless steel coaches with enhanced • Introduction of energy efficient lumi-
passenger carrying capacity have been naires such as CFL, T-5, etc.: IR is about
inducted. Further, the use of the maximum to complete a project which will achieve an
moving dimensions is being studied to permit annual reduction of 0.14 million tonnes of
the introduction of larger-sized wagons and CO2 emissions through the free distribution
coaches. This involves a study of the kinemat- of 26 million CFLs to railway employees (four

CFLs per family), in replacement of energy based Electric Energy Management System. This
inefficient incandescent lamps. The project will make key electric energy data of IR available on
is entirely financed with the carbon credits real-time basis and enable approximately 6 per cent
earned under the CDM framework. Besides, energy savings, i.e., nearly Rs 4 billion per annum.
railways are installing T-5 lamps and LED Computerisation of diesel sheds can similarly help
luminaires to save energy. considerably in the processing, retrieval and moni-
toring of SFC data (service wise).
• Use of renewable energy in electrical gen-
eral services: As per the Vision 2020 docu- Electrification as a means to reduce fuel
ment, 10 per cent of IR’s energy needs are to consumption: Railway electrification should
be sourced from renewable energy sources. IR be taken up on a priority basis. Bottlenecks in
is in various stages of implementing projects progress of electrification projects should be
that aim to harness solar energy. It has also tackled systematically. Electrification should
successfully commissioned a 10.5 MW wind be viewed as a means of making rail transport
power plant at ICF and more are under con- independent of imported fossil energy, while
sideration. also providing a choice in sourcing energy.
Moreover, electric traction allows regenera-
RECOMMENDATIONS tion of power while braking/coasting and
feeding the network, thereby reducing overall
Set up a Special Directorate: It is recom- consumption of energy and carbon emissions.
mended that IR sets up a separate directorate This is not possible with diesel traction.
to deal with all aspects of energy consumption
and management. The directorate will be mul- Setting up of captive power plants: As men-
ti-disciplinary and will coordinate with other tioned earlier, cost of diesel fuel for transpor-
directorates, apart from monitoring imple- tation is much higher than the correspond-
mentation of works/projects that result in ing energy cost incurred in electric traction.
reduction in energy consumption or enhance- IR incurs more expenditure on diesel than
ment of efficiency. A concomitant need is on electric energy. For 2008-09, the ratio of
for an institutional arrangement to provide expenditure on diesel vs. electricity was
adequate funding in the annual budgets by a 55:45. With progressive electrification and
policy directive - to implement approved pro- increasing traffic on the existing electrified
jects/works that reduce energy consumption sections, the requirement of electric energy
and bring in efficiencies, some of which have will continue to increase. At present, IR is
been discussed above. primarily dependent on SEBs, though at some
Update system of monitoring and report- locations energy is being purchased directly
ing energy consumption: IR should update from National Thermal Power Corporation
the present system of monitoring and report- (NTPC).
ing energy consumption. It is important to
note that SEC/SFC data is not maintained on For availing electric power at lower tariff, IR has set
the basis of type of rolling stock, passenger up a 1,000 MW power plant at Nabi Nagar through a
service or class of locomotive. The Annual JV with NTPC. This plant will supply 90 per cent of
Statistical Statements (ASS), Annual Report generated power to 164 substations of IR located in
& Accounts (ARA), and the Year Book (YB) Eastern and Western regions and will result in a sav-
provide consumption of electricity and die- ing of Rs 4-6 billion per year to the Railways due to
sel figures in absolute terms and in terms of lower tariff. Another 1,000 MW captive power plant
1,000 GTKM. This is not a very satisfact- is being set up at Adra through a JV with NTPC (12th
ory situation. Five Year Plan, Volume II, Planning Commission).
All electric locomotives/EMUs are now fitted with In view of the increasing energy requirement for
energy meters, but the consumption data is not yet traction, IR will need to set up more such power
used for calculation of SEC. It is possible to transmit plants at strategic locations and wheel the power to
electric consumption data from the electric locomo- its distributed network with the help of Power Grid
tives/EMUs to a central server which can then accu- Corporation as a long-term policy.
rately compute the SEC for each passenger/freight
train operated and/or for any class of locomotive or Greater use of renewable energy sources:
service at desired periodicity. It is noted from litera- As per Vision 2020 document of IR, 10 per cent
ture that German Railways has already implemented energy needs are to be met from renewable
such a system and Norwegian Railways (NSB) is in sources of energy. It is important that IR mon-
the process of implementing a similar system. NSB itors the consumption of diesel for non-trac-
expects that the web-based energy management sys- tion purposes, given its upward trend. IR must
tem will enable 6 per cent energy savings. IR should encourage greater use of renewable energy
also, on a priority basis set up a nation-wide Internet- sources, particularly for production units
NTDPC | RAILWAYS 73

Box 1.26
New Generation Locomotives
Ministry of Railways (MoR) is planning to set up a factory with a foreign partner selected through
international competitive bidding for supply of 12000 HP Electric Locomotives. This will be a major
jump over the current 6000 HP locomotives. During the ten-year period of supply programme, the pro-
posed factory at Madhepura will supply 800 electric locomotives with performance guarantees based
on international best practices. This locomotive will have very high energy efficiency and will
constitute a part of India’s response towards mitigation of the emission of green-house gases.
Successful execution of this project by the JV route will usher Indian Railways into a new era of
reforms and will provide impetus to PPP funding of railway projects.
MoR is also procuring 200 number, 9000 HP electric locomotives under the JICA loan for Western DFC.
These locomotives would be mainly used for container train operations on the Western DFC.
A factory is also planned at Marowhra for manufacture of diesel locomotives with a capacity of 5000
HP as against current usage of 4000–4500 HP by the Indian Railways. The Madhepura and Marowhra
factories are likely to be awarded during 2012-13.
and workshops, which are at one location And yet, IR levies a higher tariff on coal,
and not spread out and thus well-suited for than on POL. Therefore, it is important that
this changeover. These units must annually IR links tariffs to the actual energy con-
report energy consumption per unit of pro- sumed in transportation of a commodity. The
duction/performance, as is the case for com- same principle applies for passenger fares.
panies. Further, the government may consider It must be stated here that rationalising
grant of special financial incentives to IR for the tariffs for coal and POL would remove
adopting renewable energy in large measure. the distortion inherent in pricing of electric
It may also initiate a policy for supporting the energy. This would bring down the cost of
introduction of CO2 free passenger and freight electric energy to its true level, thereby sig-
transportation in a phased manner. nificantly benefiting IR and other intensive
users of electricity.
New generation locomotives: IR must
switch to new generation locomotives/EMUs/ Diesel traction in electrified sections:
coaches within an agreed time frame and After implementation of the Railway Safety
assured funding. In this regard, the replace- Committee’s recommendation that in an elec-
ment of Kolkata Metro coaches merits atten- trified section, 20 per cent of the total hold-
tion due to high energy consumption in metro ing of locomotives should be diesel, it is now
operation and the planned expansion of the quite normal to see diesel locomotives hauling
network. Development of energy efficient trains under OHE. The cases of diesel under
wagons and their introduction should be a pri- wire have further increased in order to avoid
ority area. Box 1.26 provides an overview of traction change and the detention involved
some of the initiatives planned by Ministry of in traction change. Since diesel operation
Railways to introduce higher horsepower and under OHE results in higher energy costs, it is
more fuel efficient locomotives. worthwhile to review this order and modify/
fine tune the instructions, taking into account
Linking tariff to the actual energy con- the experience gained.
sumed in transportation: A wagon’s pay-
load- to-tare ratio is an important factor Government of India should set up a depart-
in energy consumption. Additionally, the ment in a selected institution to take up stra-
shape of the wagon is also important as it tegic studies on environmental, energy and
determines the air resistance (this aspect energy security issues related to railway and
is equally applicable for EMUs and coach- other modes of transportation.
es). The results of a simulation to evalu-
ate the energy consumption with different IR representatives should be included in
types of wagons show that hauling of BTPN is national energy policy committees.
more energy intensive as compared to BOXN.

INTERNATIONAL EXPERIENCE IN In view of the increasing energy requirements
RAILWAY REFORM: LESSONS FOR for traction, IR will need to set up more power
INDIAN RAILWAYS plants at strategic locations and wheel the
The reform measures undertaken in major railway power to its network with the help of Power
systems such as Japan National Railways, Russian Grid Corporation as a long-term policy.
Railways, Chinese Railways, British Railways and
German Railways have been reviewed to draw les-
sons for Indian Railways. Though the factors and cir- SEPARATION OF INFRASTRUCTURE AND
cumstances leading to reforms in different railway OPERATION
systems vary, however, key drivers for reforms may
be summarised as follows: The degree of separation between infrastructure
• Financial crisis and over-indebtedness and operation has varied across railway systems
brought about by rapid expansion of network, where reforms have been carried out. Traditionally,
operation of non-remunerative lines, and railway systems have been vertically integrated
inflexible organisational structure exacer- (single entity controls both infrastructure and ser-
bated by powerful trade unions and erosion of vices and performs policy and regulatory roles). The
market share; objective of reform has been to bring about either
• Need for rapid expansion and improvement of a vertical separation (ownership of facilities
operational performance; being separate from entities controlling operations:
• Control of public subsidy; accounting separation or through organisational
• Need to usher in competition and attract pri- unbundling) or a system to allow competitive
vate investment; and access (a single entity may control infrastructure
• Ideological inclination of the government. and operation but the usage of infrastructure by
other operators is allowed on payment of transpar-
The railway reforms carried out in Japan, Germany, ently determined access charges). Some examples of
Russia, China and Britain have been summarised at the countries following the three systems are shown
Annex 1.9. below (Figure 1.30).
Key elements of reforms: Broadly, the reforms com- Once the railway systems moved away from vertical
prised one or more of the following elements: integration to either vertical separation or competi-
a. Separation of public policy and rail provider tive access, the focus of further reforms has been
roles to reorganise infrastructure and operation. The
b. Separation of infrastructure and opera- re-organisation is generally based on the following
tion: including institutional and regulatory principles:
reforms covering rationalisation of tariff • Core and non-core business,
determination, investment decisions, freedom • Geographical separation,
of operating companies and establishment of • Line of business separation (freight, urban,
independent regulators. long distance, etc),
c. Labour reforms • Functional separation (creation of profit cen-
tres and use of transfer pricing), and
Separation of public policy and rail provider • Traffic density (light density vs. high density
roles: Most of the countries reviewed, have imple- to identify to commercial services and social
mented the principle that public policy roles should service obligations
be separate from the role of service provider (for both
rail freight and passenger transport). For example, Administrative separation (separate administra-
in Germany, Japan and Russia, Ministries of Trans- tive set-up) under an umbrella organisation allows
port determine national public interest policies in individual accounting, evaluation of units as sepa-
passenger rail transport, supplemented in all three rate profit or cost centres and charging for usage of
countries by significant roles for the relevant local assets by another unit on the principle of transfer
government transport administrations for specific pricing. Functional division also allows for bidding
suburban/regional systems. China has also recently out of some of the core activities like maintenance
(March 2013) decided to restructure its railway sec- of tracks and locomotives on a competitive basis.
tor by dissolving the Ministry of Railways and sepa- Alternatively, the reorganisation may take the form
rating railway policy and regulation from commer- of separate geographical organisations (e.g. Japan)
cial operations (Box 1.27). Most of the countries have or unbundling the current organisation and priva-
also separated the public policy roles of the Minis- tisation of several activities (e.g. U.K.). As summa-
try in transport integration and sub-sectoral policy rised in Annex 1.9, extreme unbundling also led to
making from either the economic regulation and/or coordination failure and cost of managing the same
safety regulation roles (Box 1.28). increased drastically.
NTDPC | RAILWAYS 75

Box 1.27
Reform of Railway Sector in China
China has been restructuring and reforming various sectors of the economy for several years now. The
objective was to enable them to respond effectively to market economy and rapid economic growth and
function effectively in the best national interest. These initiatives included reform of several Minis-
tries of the Government in Beijing.
In March 2013, China decided to restructure its railway sector by dissolving the Ministry of
Railways (MoR) and separating railway policy and regulation from commercial operations.
As a result, MoR’s railway planning and policy making functions have been assigned to the
Ministry of Transport (MoT), while its other administrative functions such as establishing and moni-
toring technical standards, safety standards and service quality have been assigned to a new organisa-
tion, the State Railways Administration (SRA). In future, MoT would also establish policy for railways.
It would develop a unified policy for all transport modes aiming at modal integration and optimal use
of resources. It is expected that only a handful of MoR staff would move to MoT. The responsibility
for the enterprise (commercial operations of railways) has been assigned to the newly formed
China Railway Corporation (CRC) that is manned virtually by all the staff and managers of
MoR except a few that will move to MoT.
CRC is fully owned by Ministry of Finance (MoF) and will have its own Board of Directors. The Min-
ister of Railways has been appointed as the CEO of CRC. The mandate of CRC is to operate
the railway on commercial lines. It is understood that in line with this policy, CRC would be
compensated financially if it is required to provide services that are financially not viable.
There is no change, for the present, in the organisation structure and the existing railway administra-
tions will continue to function as before. This ensures that there is no disruption in railway services as
a result of restructuring of MoR. However, it is suggested that competition will be introduced and the
private sector will be encouraged to invest in commercial railways in the future.
Broad objectives of recent changes include:

• Coordinated development of policy, macro level planning and allocation of resources for the
transport sector
• Independent supervision of the performance of CRC
• Independent safety regulation of rail sector
• Regulation of technical standards for railways
• Improving efficiency of railway management and operations i.e. CRC
• Create competition in railway sector
• Encourage non-government investment in rail sector
Source: NTDPC.
Box 1.28
Main Responsibility for Public Interest Roles
Australia, Brazil, Canada, China, Germany, Japan, Russia and the United States, all have unitary
transport ministries at the central government level whose role is to develop and administer poli-
cies to protect and promote public interests across the transport sector. This is to establish integrated
national transport policies that transcend or augment individual modal interests. China was a partial
exception, although it has recently enhanced the role of Ministry of Transport to establish policy for
railways along with national highways, ports and waterways, shipping, airports, aviation and trans-
port integration.
(Contd...)

MAIN RESPONSIBILITY FOR PUBLIC INTEREST ROLES
RAILWAY
COUNTRIES INTEGRATED SECTOR
TRANSPORT ECONOMIC REGULATION SAFETY REGULATION
STRATEGY/
POLICIES POLICIES
Australia Department of Transport Australian Competition Departments of Transport or
Commission Independent regulators
varies by State)
Brazil Ministry of Transport National Agency for Land Transport
Canada Department of transport Canadian Transportation Agency Transportation Safety Board
Germany Ministry of Transport Federal Cartel Office Federal Rail Agency
Japan Ministry of Transport Japan Transport Safety Board
Russia Ministry of Transport MOT & Ministry of Economic Ministry of Transport
Development and Trade (MEDT)
USA Department of Transport (DOT) DOT-Surface National Transport Safety Board/
Transportation Board DOT-FRA

Source: Freight Railways Governance Organisation and Management: An International Round-up, World Bank, Page 9, Paul Amos, July 2011.
Figure 1.30
Separation of Infrastructure and Operation
Separate Operating Operating

Operating Operating
Operating Unit Unit Company 1 Company 2
Company
Infrastructure Creation Infrastructure Creation

Unit Infrastructure Company
Unit
VERTICAL INTEGRATION COMPETITIVE ACCESS VERTICAL SEPARATION
India, New Zealand, Austria, Belgium, UK, Sweden, Bulgaria, Denmark, Norway,
Japan, Europe (rolling stock), Sweden, Japan,
Greece, Ireland, Italy, Luxembourg, Latvia, Netherlands, Portugal, Romania, Spain,
Czech Republic, Finland, France, Slovenia
Lithuania, Hungary, Poland, Switzerland Slovakia
Once the asset restructuring is completed, the opera- structural change on labour needs to be taken into
tion of the railway can be governed through haulage account. For example, in Sweden, high level of union-
agreement, exclusive or multiple access agreements, isation existed among both blue-collar and white-col-
reciprocal operating agreement, as the case may be. lar employees and management was obliged to share
In the case of haulage agreement, track owner may strategic information with the employees and allow
allow any operator to use the track based on fixed employee representation on the company board.
haulage charges. American President Line (APL), Railway reorganisation entailed negotiation with
and CSX Corp are examples for these. In the case of the unions on productivity issues through produc-
access agreement with one or multiple operators, tivity incentivisation, multi-task assignment, and
operator pays for the tonnage it carries e.g. Cana- performance compensation. The restructuring had
dian National (CN) operating over CSX. Annex 1.10 to work within the existing framework.
summarises the track access tariff principles and/
or formulae used in three countries (Australia, US Japan grappled with labour issues through reactiva-
and Canada). tion of railway management consultation system.
This enabled direct discussion on issues such as work
LABOUR REFORMS conditions and organisational needs. Japan National
Railway (JNR) also had to deal with issues of sen-
Labour reform is another important dimension iority versus skill-based wages, determination of
of reforms as railways are traditionally one of the retirement and social benefits. After restructuring,
largest employers and therefore, the impact of any the labour cost as a percentage of revenue showed a
NTDPC | RAILWAYS 77

substantial improvement in Japan and Sweden from
70 per cent and 83 per cent to 33 per cent and 70 per Some of the problems afflicting the IR’s organisa-
cent respectively. tions at present are:
a. Centralisation of decision making on many
LESSONS FOR INDIAN RAILWAYS operational issues at the level of members of
Railway Board - as the roles of policy making,
A review of the reform measures undertaken in regulation and operations are today combined
major railway systems shows that most of the coun- in the Railway Board. It leaves little time for
tries have separated the public policy role from the strategic thinking and interferes with policy-
role of service provider (for both rail freight and pas- making role of the Board.
senger transport). The Chinese example is of partic- b. Duality of role— commercial as well social,
ular relevance to India, as the railway sector in Chi- without any clear demarcation.
na until recently was supervised by the Ministry of c. Overly differentiated and departmental
Railways (MOR), a body which was responsible for organisation structure and lack of a coherent
strategy, policy and regulatory functions as well as vision to guide the organisation.
administration of operational entities that delivered d. Production-centric approach to business and
the Chinese Railways network and rail transport ser- lack of commercial and customer- orienta-
vices (similar to India). tion.
e. Bureaucratic decision- making processes and
However, as discussed earlier, in March 2013, Chi- procedures.
na also decided to restructure its railway sector by f. Inadequate empowerment at Zonal Railway
dissolving the Ministry of Railways and separat- level coupled with absence or diffusion of
ing railway policy and regulation from commer- accountability.
cial operations. The big decision to dismantle MOR g. Short tenure at the top.
in China has only started the process of reform of h. Politicisation of tariff-setting and investment
railway sector and it will be fully effective in a few planning.
years. The aim is that this major step does not cause i. Poor project management and inadequacies
any disruption in railway services in the near future in project delivery system resulting in enor-
and planned expansion of railways materialises. It mous time and cost overrun.
is expected that several well-considered steps shall j. Lack of capacity and policy for attracting pri-
be taken over a period of two to three years in order vate investment.
to achieve the long-term benefits of the reform pro- k. Accounting system inconsistent with busi-
cess. Some of the important issues that need to be ness accounting, which does not help as a
addressed are discussed in Box 1.29. In the Indian decision making tool for management.
context too, any profound change in the organisa- l. Absence of a system to track trends in techno-
tional structure may actually distract the railways logical developments, induct new technology
from the enormous task of building infrastructure and develop indigenous technology.
and improving services. Some of the key elements
of the reform would be accounting reform, reform NEED FOR REFORMS
in investment planning, regulatory structure, reor-
ganisation on business lines, hiving off of activities. This report has emphasised the need to reverse
the shift that has been taking place of both freight
and passenger transport from the railways to oth-
ORGANISATIONAL REFORMS er modes, especially to roads. This is essential to
ensure the kind of high growth that is envisaged
CURRENT ORGANISATIONAL STRUCTURE for the economy as a whole. The kind of invest-
AND ISSUES ment that is being projected in the Indian Railways
over the next 20 years is unprecedented in the his-
The highest level of management in the Ministry of tory of the railways. For this kind of change to
Railways, headed by the Hon’ble Minister of Rail- take place, it is essential that the Indian Railways
ways and one or two Hon’ble Ministers of State, is must reinvent itself and expand so that it can
the Indian Railway Board. The Railway Board is play the kind of strategic role envisaged for it to
headed by a Chairman and comprises six other mem- meet the expanding transport requirements of
bers from specific departmental areas. Indian Rail- the country. It must rapidly expand its network,
ways is divided into 17 zones, each headed by its own augment capacity, modernise and improve ser-
General Manager (GM) and assisted by Principal vices so as to meet the goal of carrying 50 per cent
Heads drawn on departmental lines. As a result, the of the freight transport by 2032 and meet the pas-
entire organisation gets divided into departmental senger demand in full. By 2032, railways will have
lines based on different specialisations. This organi- to carry close to 6,500 billion tonnes km in freight
sational structure of the railways results in over-dif- compared to 626 billion tonnes km in 2011 while it
ferentiation and there is a lack of a coherent vision must keep pace with growing passenger demand due
to guide the Indian Railways. to GDP growth.

Box 1.29
Reform of Railway Sector in China: Impact and Issues
Railway sector in China is very large and plays a vital role in supporting its economic performance.
The changes that impact railway operations would be implemented over time so that there is no dis-
ruption in rail services. Since China’s economy shall continue to grow fairly rapidly, it is also impera-
tive that, over the next two decades, railways develop sufficient capacity to service increase in demand
for passenger as well as freight railway transport. It also needs to respond to demands for superior
services as average incomes increase and more sophisticated commodities are transported.
The important issues that would need to be addressed are discussed below:
• Debt: For the present all the debt of MoR (RMB 2.6 trillion-USD 400 billion) has been transferred
to CRC. This is likely to increase to about USD 600 billion as all the planned railway projects are
implemented over the next few years. It is accepted that investments made in High Speed Rail-
way network are not likely to be profitable for several years. A decision will need to be taken in
respect of debt. It is possible that some of it would be transferred to the Central government to
enable CRC to operate as a viable financial entity.
• Planned investments in railways: It is expected that the recent reform will not slow down the
investment programme of railways and CRC would implement all planned projects included in
the Medium Term Plan till 2020.
• Pricing: A clear policy needs to be articulated in respect of the authority of CRC for pricing of
services. It is possible that CRC may not be given total freedom in pricing.
• Financial Management System for CRC: CRC will need to develop a financial management
system that is aligned to commercial accounting standards. This system should be able to seg-
regate costs by business and service so that informed decisions about pricing and cost control
could be taken.
• Salary structure for CRC staff: Decision on staff salaries will need to be taken since company
salary structure is significantly higher than that for Ministry employees.
• Criteria for Monitoring Performance of CRC: Developing criteria for monitoring perfor-
mance of CRC and defining improvement in productivity of CRC assets and staff and financial
performance for the next five years or so.
• Encouraging PPP: Long term aim is to encourage investment in railway sector by private sec-
tor and non-government entities. Policy initiatives that promote such investment would need to
be identified and implemented.
Source: NTDPC.
The technology gap must be bridged and rail RECOMMENDATIONS FOR RAILWAY REFORMS
speed must be increased to 160-200 kmph along IN PAST STUDIES
with a zero accident and failure rate. The railways
must also change its perception to a more customer- A common feature of most railway reforms in
oriented proposition offering best value against countries we have studied is the separation of the
competition. The currently existing capacity policy making apparatus from the operation of the
constraints will require the railways to carry out railways themselves. Most countries have now set
major capacity augmentation - close to 10,000 km up their operating railway systems in some kind of
of DFCs, 40,000 km of doubling/quadrupling/multi- corporate form, although in most countries, gov-
ple lines etc. ernment ownership of the railway systems remains
the norm, except in the United States. Policy mak-
It is clear that the task being attempted is stupen- ing is of course retained in a government Ministry,
dous by any measure, especially judged against the usually a unified Ministry of Transport, but some-
pace of capacity augmentation and growth achieved times a dedicated Ministry of Railways. The organ-
in the past. For example, the doubling/multiple lines isational structure of Indian Railways is not very
being attempted (at the rate of 1,500-2,000 km per different from the kind of structure that existed
annum), is four times as large as the best that has prior to these reforms in countries such as Russia
been achieved by railways in the Five Year Plans in and China. Unlike Indian Railways, however, these
the past. Achievement of such targets will not be pos- countries have undertaken wide ranging reforms
sible given the current organisation structure and in recent times where they have also separated out
there is need for organisational reforms to address policy making functions from operation of their
the above lacunae. respective railways.
NTDPC | RAILWAYS 79

Box 1.30
Recommendations of the Prakash Tandon Committee (1994)
• Restructure the Railway Board with Members responsible for:

i. Bulk freight, passenger and inter-modal services;
ii. Infrastructure;
iii. Moving assets;
iv. Finance and Planning;
v. HR, R&D, Quality.
• Railway Board to focus on policy, planning, performance evaluation, major projects and appoint-
ments and not day-to-day supervision/sanction/control.
• Similar restructuring at Zonal Railways with six AGMs.
• Minimum tenure of 3 years for Board Members and GMs.
• Unified cadre for railways through cross-disciplinary rotation and selection for general manage-
ment positions.
• Recruitment of qualified finance professionals.
• Shedding of off-line activities-corporatisation of Production Units.
• Induction of specialists as advisers.
• JV with state governments and private entities.
• Decision support system for investment planning.
Thus, the key issue to be addressed in reform of very different from the kind of reforms that have
Indian Railways is the institutional separation been undertaken in other infrastructure sectors.
of roles into policy, regulatory and management The 2001 Expert Group also suggested the setting
functions. Currently, these roles are blurred with up of a Railways Regulatory Authority whose func-
the Railway Board essentially performing all the tions would relate to the setting of freight tariffs and
three roles put together. This causes confusion about passenger fares as also resolution of disputes. These
the underlying vision and mission of the Indian functions would then be delinked from the Ministry
Railways. by setting up a Railways Regulatory Authority.
If such an institutional separation of roles takes The suggested Railways Regulatory Authority
place, it would mean that policy makers are limit- would be guided by the vision and policies laid
ed to setting policies; regulators to fix competition down by the Government, and not the Railway Min-
rules in general and pricing in particular; and the istry alone. It would thus deal with issues relating
railways operations are done by a corporate or cor- to subsidies and cross subsidies, as broadly laid
porate like entity or entities. down by the government, and help reduce the dual-
ity of role syndrome commercial as well as social
Within India, many committees have reviewed the now afflicting the railways. The Regulator’s basic
organisational structure of the Indian Railways duty would be the protection of consumer interests,
and have recommended the need to undertake providing a level playing field and also ensuring
reforms. Key recommendations of some of the Com- fairness in dealings between Indian Railways and
mittees are summarised below (Figure 1.31 and PPP participants in projects. Once such a Railways
Boxes 1.30 to 1.32). Regulatory Authority is set up, it would become pos-
sible to separate out the commercial operations of
This section provides a review of the recommenda- the Indian Railways from those operations that are
tions made by these various committees over the done for socio-objectives at the behest of the gov-
last 20 years. While the Prakash Tandon Commit- ernment. We note that the Government has already
tee of 1994 and the Expert Group for Modernisation approved the setting up of a Rail Tariff Authority,
of Indian Railways (2012) suggested organisational but which is yet to be implemented.
reforms while keeping the Railways within a govern-
ment setup, the Expert Group on Indian Railways For this to become possible, the implementation of
2001 visualised the setting up of an Indian Railways accounting reforms is an essential feature of the
Corporation governed by an Indian Railways Execu- overall reforms that is envisaged. As mentioned in
tive Board (IREB). In the proposal of the 2001 Expert Section 5, the accounting system of the Indian Rail-
Group, the Indian Railways Corporation would thus ways is still organised in a governmental account-
work under the Government of India like any other ing framework and does not follow the accounting
corporate body with the government laying down standards as prescribed in the Companies Act.
vision, objective and policy directives. This is not Any reform of the railway system, so that it is run

Figure 1.31
Roadmap for Railway Restructuring as Recommended by The Expert Group on
Indian Railways (2001)
PHASE 1 PHASE 2 PHASE 3 PHASE 4
TIME FRAME • Upto 1 year • 1 year to 3 years • 3 to 5 years • Beyond 5 years

FOCUS AREAS • Set-up Indian Railway • Set-up Indian Railway • Corporatise • Evaluate ownership
Regulatory Authority Executive Board • Restructure core options
• Make changes to • Prepare ground for businesses • Refine restructuring
legislation changing structure • Complete non-core process
• Delineate social and • Commence non-core’ restructuring
commercial restructuring’ • Revamp regional
objectives organisation
• Initiate intensive • Introduce
communication with Competition
stakeholders
Box 1.31
The Expert Group on Indian Railways (2001): Key Recommendations
The Report of the Expert Group on Indian Railways (2001), noted that ‘Indian Railways is an institution
embedded with contradictions. Management knows that the combination of unremunerative invest-
ments coupled to massive under pricing of passenger fares is the path to financial catastrophe, yet it is
not able to take any effective action to reverse the situation’. The Expert Group recommended that three
areas in particular will need to be fundamentally redesigned: Governance, Structure and Portfolio.
(a) Governance: Separate Institutions for Separate Roles: Policy, Regulatory and Management
Governance defines the roles and institutional relationships associated with policy, regulation and
management. These roles are currently blurred and need to be clarified and institutionalised. Indian
Railways must aim to be corporatised into the ‘Indian Railways Corporation’ (IRC) or Bharat Rail Nigam
(BRaiN). The Government of India should be in charge of defining the key thrusts of policy direction. It
would also need to set up an Indian Rail Regulatory Authority (IRRA), which would be necessary to
regulate IRC’s activities as a monopoly supplier of rail services to begin with, particularly related to tar-
iff setting. The Indian Railways Corporation (IRC) would be governed by a reconstituted Indian Railways
Executive Board (IREB).
(b) Structure: Structure relates to the internal organisational design of IR. The underlying design
principle is to create an outward looking, business oriented, customer driven institution. This will involve
reorganising the core transportation network into its key component parts: freight, passenger, suburban,
shared infrastructure: fixed, and shared infrastructure: others. These business units will operate with a
large degree of autonomy yet be held accountable for a balanced scorecard of commercial performance
measures. Further, adopting commercial systems is an essential pre-requisite for a modern railway. The
corporatisation of IR into IRC will necessitate the recasting of IR’s accounts into company format.
The Government will therefore need to initiate the process of restructuring the financial accounts of IR
in accordance with the Company’s Act 1956.
(c) Portfolio: Portfolio relates to the breadth of business IRC will incorporate under its umbrella of
holdings. The view of the Expert Group is that less is more. In other words, IRC should be engaged in
only those businesses directly related to its core activity of rail based logistics and passenger transport.
Non-core businesses should be spun off on an arms length basis. The eventual ownership of these enti-
ties is not an issue that concerned the Expert Group. Difficult though it may be, the Expert Group antici-
pates that priority candidates for accelerated spin off would be all the manufacturing units which should
be done within a specified time limit.
NTDPC | RAILWAYS 81

Box 1.32
Recommendations of the Expert Group for Modernisation of Indian
Railways (2012)
• Re-organise Railway Board along business discipline to reflect Chairman as Chief Executive
Officer and Members for the following:
• Safety
• Business development/ Commercial
• Technology/ ICT & Signalling
• Freight
• Passenger Services
• Infrastructure
• Finance
• HR and PPP
• Create commodity-wise Key Account Directors under Member Freight for major commodities
like coal, iron ore, steel, food grain, fertiliser etc. Coal is 45 per cent for total freight traffic and
needs special attention.
• Create Key Account Directors of suburban, long distance passenger etc. under Member
Passenger.
• Ensure autonomy, flexibility and accountability at all levels with clear P&L responsibilities
• Make provisions for handling of all parliamentary functions (liaison functions with govern-
ment, including handling of Parliament questions) by a Joint Secretary level officer in the Min-
istry, which would set the RB free to focus exclusively on business issues.
• Empower Zonal Railways along with accountability:
• The present system of seeking sanction for Capital investment to be included in the Works
and Rolling Stock Programmes of railways from the Railway Board/ Ministry should give
way to a more decentralised decision-making in critical areas like safety, traffic facility, pas-
senger amenity and other areas, by delegation of powers at the zonal level.
• GMs of Zonal Railways to be empowered to take decisions, within a framework of rules and
investment limits. The Zonal Railways should also be made accountable for return on capi-
tal, transport output, profitability and safety.
• Review the existing PPP policy framework in the light of hitherto poor response and PPP
experience.
• Establish a separate Authority/SPV/Organisation for implementation of Major Projects such
as development of high speed corridors, redevelopment of railway stations etc.
• Build capacity for the officers at the Zonal railways to manage PPP projects. A PPP cell
should be constituted in each zone to identify, develop, implement and monitor projects at the
zonal level.
on business line in the future, will be difficult to Railway Board was first constituted in 1905, its size,
achieve unless accounting reform is undertaken. functions and responsibilities have gone on wid-
Adopting commercial systems is an essential pre- ening. Today Railway Board presents itself as all
requisite for a modern railway system. The finan- encompassing monolithic structure where it has
cial accounts of Indian Railways therefore need become all in one - policy framer, operator of train
to restructured in accordance with the Companies services and regulator’. Similar observations have
Act. The objective is to develop financial statements been made by other committees in the past.
that can be understood by the financial community
and the public at large. Unless this is done, it is dif- As discussed earlier, the Report of the Expert
ficult to comprehend and assess the financial per- Group on Indian Railways, recommended a com-
formance of Indian Railways and to separate out its plete separation of roles of policy making, legisla-
commercial functions from social functions. tion and management of operations with the GoI
being responsible for setting the broad parameters
PROPOSED ORGANISATIONAL REFORMS in which policy is to be formulated, as well as con-
stituting the Indian Railway Regulatory Authority
SEPARATION OF POLICY MAKING AND OPERATIONAL (IRRA) and the Indian Railways Executive Board
RESPONSIBILITIES AT THE RAILWAY BOARD LEVEL (IREB) (Figure 1.32). It recommended that the exist-
The High Level Safety Review Committee, chaired ing Railway Board should be phased out and the
by Dr. Kakodkar noted in its report that: ‘Ever since

Figure 1.32
Separate Institutions for Separate Roles: The Expert Group on Indian
Railways (2001)
• Define Vision
• Set Policy Direction
• Constitute IRRA
• Constitute REB
Government of India
Indian Railways Railway

Regulatory Executive Board
Authority
• Manage the Railway organi-

• Develop regulatory frame- sation to best meet objec-
work in line with vision tives of the owner within
• Resolve disputes the regulatory constraints
• Protect consumer interests • Implement restructuring
• Fix tariffs and subsidies
• Develop framework for the
introduction of competition
Indian Railways Corporation (IRC) should be gov- is common to all the Committees. There is also rela-
erned by the newly constituted IREB. tive unanimity in setting up a Rail Tariff Regula-
tory Authority.
The Pitroda Committee (the Expert Group for
Modernisation of Indian Railways, 2012) also rec- The NTDPC has debated this issue at different
ommended reorganising the Railway Board along times. It is clear that the Indian Railways is now
business disciplines. Table 1.19 shows the recom- an outlier in being run as government department,
mendations of the two committees regarding recon- and the kind of strategic change needed in its oper-
stituting the Railway Board. ations and magnitude of investments required over
the next 20 years would suggest that a more radi-
The reform of the railway sector in China, cal reform be carried out as suggested in the 2001
announced in March 2013 is on the similar lines and Expert Group report. While recognising the lack of
proposes to separate railway policy and regulation consensus on this issue in the Government, in the
from commercial operations (Box 1.27). Railways, and in the country at large, the NTDPC
feels that we have now an opportunity to draw up a
ORGANISATIONAL REFORMS: KEY RECOMMENDATIONS vision for the Indian Railways in 2030 and that it is
Both the 2001 & 2012 Expert Groups have suggest- incumbent on us to suggest a structure that would
ed the re-organisation of the Indian Railways into provide for the most efficient and sustainable deliv-
business lines such as freight, passenger services, ery of rail transport.
infrastructure, finance and the like as illustrated in
Table 1.19. The difference between the 2001 Expert We are therefore proposing that it is now time for the
Group and most of the other committees lies in government to reconsider the recommendations of
their recommendation to corporatise the operations the 2001 Expert Group to set up an Indian Railways
of the Indian Railways as has been done with other Corporation in a manner that it is able to meet the
sectors in India, subsequent to economic reforms. challenges for overall transport strategy as it evolves
Other committees including the 2012 Expert Group over the next 20 years.
have gone along with the retention of the current
framework of railways being run as a Government It may be noted that in other infrastructure sectors,
department, while reorganising the Railway Board such a reform has already been carried out. In the
along business discipline lines. The objective of power sector, for example, the Minsitry of Power
making the Railways more commercially oriented sets overall policies and priorities; the regulation
NTDPC | RAILWAYS 83

Table 1.19
Reorganising the Railway Board
THE EXPERT GROUP ON THE EXPERT GROUP FOR MODERNISATION OF
INDIAN RAILWAYS (2001) INDIAN RAILWAYS (2012)
• Re-organise Railway Board along business discipline to
• Existing Railway Board to be phased out and the Indian Railway reflect Chairman as Chief Executive Officer and Members for
Executive Board to be constituted by the Government. the following:
• Executive Board to have 15 members: - Safety

Operations Office (On-going management) - Permanent posi-
tion to have a minimum tenure of 5 years - Business Development/ Commercial
- Chairperson
- COO freight - Technology/ ICT & Signalling
- COO passenger
- COO suburban - Freight
- COO Infrastructure - fixed
- COO Infrastructure - other - Passenger Services
- VP Finance and Planning
- VP HR - Infrastructure
External office for Strategy (transition management) - - Finance

Temporary positions - initial tenure of 3 years to be extended if
necessary - HR and PPP
- COOs— non-core businesses (2)
- Executive Directors (5) (Traffic -3, Infrastructure -2)
Source: The Indian Railways Report 2001: Expert Group on Indian Railways; Report of the Expert Group for Modernisation of Indian Railways, Ministry of Railways, 2012.
is done by the Central Electricity Regulatory Com- private-partnership, it is likely that there will be a
mission along with a network of State level regula- continuing creation of other railways corporations,
tory commissions; the delivery of power is overseen public or private, to undertake railways operations.
by the central Ministry of Power, but implemented It is therefore desirable that the railway system
through large public sector corporations, such itself as a whole be corporatised in a more organ-
as National Thermal Power Corporation (NTPC), ised manner now.
the National Hydro-electric Power Corporation
(NHPC), Power Grid Corporation, Power Finance The NTDPC is not providing detailed recommen-
Corporation and others at the state level. Within the dations in this regard, since it recognises that this
same framework, there are also now an increasing requires further discussion and detailed study on
number of private sector corporations that gener- what may be the best form of corporate reorganisa-
ate and distribute power. Similarly, in the telecom tion that would be in the interest of the Indian Rail-
sector, the Ministry of Communications oversees ways. Furthermore, such a reform will also entail
policies and priorities in the sector, the Telecom amendment of the Railways Act, 1989, and the
Regulatory Authority of India (TRAI) does overall Indian Railways Board Act, 1905. Once an in prin-
regulation including that of tariff, while both pub- ciple decision is taken to undertake such a reform,
lic sector corporations, such as Bharat Sanchar Nig- a more detailed process of transformation will have
am Ltd (BSNL), and Mahanagar Telecom Nigam Ltd to be designed. However, there would appear to be
(MTNL), a plethora of private sector corporations near unanimity among various committees that
deliver the services. Thus, the kind of reform pro- Indian Railways be reorganised into business lines.
posed by the 2001 Expert Group for Railways, and We can envisage an Indian Railways Corporation
implemented by most of the countries, is similar to (IRC) to be headed by an Indian Railways Executive
what has already been done in other infrastructure Board (IREB) with the Chairman as Chief Execu-
sectors in India. tive Officer (CEO) and Members in charge of dif-
ferent business lines. Decisions will also have to be
Therefore, the NTDPC recommends that it is time taken on the relationship between this apex Indian
that a similar reform be carried out in the railways. Railways Corporation and other Railways compa-
There is a clear need to separate the different roles. nies that currently exist and those that may come
Policy should be with the government, regulation up in the future. One possibility is that such corpo-
including tariff regulation should be with a regula- rations could all be subsidiaries of the IRC or joint
tory authority, and operations should be run by a ventures of the IRC with other private or public
corporate entity or entities. The Railways already entities.
operate a number of corporations, such as the Con-
tainer Corporation of India Ltd (CONCOR), the It is recommended that the IREB itself would limit
new DFCCIL, Konkan Railway Corporation (KRC), its involvement to strategic planning, policy-mak-
the Indian Railways Finance Corporation (IRFC) ing and the usual functions of the Board of such an
among others. With the increasing resort to public- entity. It should function like the board of a com-

pany with clear focus on business, bottom-line and There is a clear need to separate the different
other clearly defined objectives. Day-to-day opera- roles involved in running the railways. Policy
tions, monitoring and decision making could be should be with the government, regulation
delegated to the Zonal Railways and project organi-
sations or companies. The IREB would, however, including tariff regulation should be with a
continue to monitor the performance periodically regulatory authority, and operations should be
to ensure that the strategic plans and the policies run by a corporate entity or entities
are implemented.
Governmental functions affecting the Railways

would, as is done in other parts of the Government, country, there would then, perhaps, be little need
be carried out by a compact Ministry of Railways for such a transformation as has been proposed.
in the first instance, and perhaps move later to the
unified Ministry of Transport, as is recommended Corporatisation, as envisaged, will not only allow bet-
elsewhere in this report. Such a phased reform has ter use of Railway assets along with higher quality of
also been carried out in similar fashion in other service and greater emphasis on profitability but also
countries that have undertaken similar transfor- be able to compensate the Railway employees ade-
mation of their respective Railways. The Railways quately for the increased profits that they are able to
Regulatory Authority and the IRC would then be bring for the organisation, as noted by the Sixth Cen-
responsible to the Ministry as other similar enti- tral Pay Commission in its report (Box 1.33). Moreo-
ties are to their respective Ministries. The staffing ver, as a corporate entity IRC would be able to access
of the Ministry of Railways should be done by the capital from external sources for funding its signifi-
assignment of Railways officers from the existing cant expansion plan, thereby reducing the stress on
set up and from IRC and other Railways entities in government borrowings and facilitating the attain-
the future. Careful consideration would have to be ment of fiscal defict targets set under FRBMA.
given to the delineation of functions that remain
with the Government, and those to be exercised by The 2001 Expert Group had given a more detailed
the IRC. timeline for Railways reforms; in that timeline, it
was suggested that it will take at least five years
We may note that the IRC should not be set up under of preparation for the formation of an Indian Rail-
the Companies Act. In fact, it would be advisable to ways Corporation and associated other changes in
set it up as a statutory Railways Corporation for the system. In the meantime, it would be essential
which a new Act would have to be legislated pro- to begin the process of change within the current
viding clearly the functions and powers of such organisational framework.
an entity. It is important that the IRC be set up as
a statutory corporation since the current Railways There is already in-principle agreement in the
Act endows Indian Railways with many quasi-gov- Indian Railways that accounting reform be under-
ernmental powers which will have to be retained by taken so that Railways accounting is done in a busi-
the IRC. However, it would need to be ensured that ness oriented fashion. This must be implemented
such a statutory corporation is essentially run on forthwith. Second, the Government has already
business lines, while exercising other functions of approved the formation of a new Rail Tariff Author-
a social and strategic nature which are essential to ity. Hence, this Authority should be set up as soon
the functioning of Railways in India. as possible in order to provide rationality in the set-
ting of both passenger and freight tariffs. Third, a re-
The NTDPC is fully aware that the kind of trans- organisation of the Railway Board may be undertak-
formation proposed above is contentious and does en on the lines of the recommendations of the 2012
need further discussion among the main stakehold- Expert Group (Chairman: Sam Pitroda) so that it is
ers in the country, including Railways staff and the organised into the kind of business lines proposed.
unions. It is essential that a full understanding is If these interim reforms are undertaken, it would
reached that such a transformation would be under- then become much easier to transform the current
taken in order to empower the Indian Railways system into a corporatised system as proposed. The
system to modernise, to expand, to become more recommendations in the rest of this section may be
efficient, and serve the needs of the people of the seen as the short term reforms that are needed to
country at large and the country’s overall transport make the Indian Railways commercially oriented
strategic needs. As has been made clear in the ear- that would ultimately result in the kind of corporate
lier sections, what is envisaged is an unprecedented structure as proposed.
significant expansion of the Railways system in
India to meet the transport needs of the future in SHORT- TO MEDIUM-TERM REFORMS
India. It would perhaps be correct to say that if such Reorganisation on business lines: Indan Railways
an expansion in Railways was not needed in the is presently organised in terms of several functional
NTDPC | RAILWAYS 85

Box 1.33
Corporatisation of Indian Railways: Sixth Central Pay Commission
Report (Excerpts)
Various Railway Federations have demanded a special dispensation for Railway employees keeping in view
the profitability of their organisation. The demand is not without substance especially as employees have to
be rewarded for efficient performance of the entire organisation that has yielded continuous profits without
resorting to any substantial increase in the passenger/freight fares in the recent years. A separate dispensa-
tion in terms of pay scales and allowances is not, however, possible, as long as the organisation continues
to be a Ministry in the Central Government because it will then need to be governed by the common pay
scales and allowances for the entire Central Government. In such a scenario, the optimal solution would be
corporatisation of Indian Railways as a Public Sector Enterprise. This would allow the Railways flexibility
in determining its own compensation package. While privatization of Railways cannot be an option as Rail-
ways is and will continue to be a public utility service providing crucial infrastructure support for balanced
economic growth of the country, corporatisation of Railways as a Central Government PSE is a viable option
that will not only allow better use of Railway assets along with higher quality of service and greater empha-
sis on profitability but also be able to compensate the Railway employees adequately for the increased profits
that they are able to bring for the organisation.
The only argument that can be used against corporatization is that it may lead the Railways to go for profit-
ability as its primary object without catering to the benefit of the general public. Another negative point
of such corporatisation usually projected is that in times of national Emergency like external aggression
etc. the Government may no longer be assured of full cooperation from Railways in case it is corporatised.
There is not much substance in these arguments because even as a public sector undertaking, the railways
would still belong to the public domain with the only difference that the Government then would need to
provide upfront compensation to Railways for any social project taken up by Railways in advancement of
Governmental policies.
Corporatisation would raise the productivity of services provided by the Railways as it would then be rel-
atively free from governmental control. The Workers, Managers and Executives in Railway organization
would then be free to raise the productivity of their organisation and participate in its increased profitabil-
ity. The Commission, accordingly, recommends that corporatisation of Railways as a Central Public Sector
Enterprise should be considered in right earnest by the Government. This will not only benefit the employ-
ees in Railways but also the common citizens as increased productivity of Railways will ensure better ser-
vices to the common citizen.
Source: Report of the Sixth Central Pay Commission.
departments like Civil Engineering, Mechanical Engi- ‘Historically, IR was forced to be an integrator of
neering, Electrical Engineering, Signal and Telecom, activities in order to be successful it had both to pro-
etc. While in theory, such a structure promotes func- vide cradle-to-grave care for its employees, and also to
tional specialisation, each department being manned produce everything from meals to wheels in order to
by separate cadres has led to lack of unity and stra- operate. Indian Railways today is a complex conglom-
tegic coherence. From recruitment to retirement, erate. It runs major businesses as diverse as hospi-
officers spend their service years almost entirely in tals, schools, catering, manufacturing, real estate and
the department getting deeply steeped in departmen- maintenance. To manage these diverse businesses,
tal thinking. A great deal of organisational energy however, it has created a monolithic organisational
is expended in inter-departmental competition for structure based on function first and geography sec-
resources. ond. This makes life more complex than it should be.
It makes it hard to answer important questions and it
The Report of the Expert Group on Indian Railways makes unimportant issues very important.’
(2001) noted that:
Table 1.20 summarises the major recommendations
‘Indian Railways remains an integrated, func- of the Expert Group of 2001 (Dr Rakesh Mohan) and
tionally oriented institution that is organised Dr Pitroda committee (2012) regarding reorganisa-
around its cadres instead of around its busi- tion on business lines. Several railways internation-
nesses or customers.’ ally have reorganised their operations in terms of

Table 1.20
Reorganisation on Business Lines
THE EXPERT GROUP FOR MODERNISATION OF
THE EXPERT GROUP ON INDIAN RAILWAYS (2001) INDIAN RAILWAYS (2012)
• The core transportation business of Indian Railways should • Create commodity wise Key Account Directors under Member
be organised into five strategic business units (SBUs) Freight for major commodities like coal, iron ore, steel, food
comprising: grain, fertiliser etc. Coal is 45 per cent for total freight traffic
- Freight transportation and needs special attention.
- Passenger transportation
- Suburban transportation • Create Key Account Directors of suburban, long
- Fixed infrastructure distance passenger, etc. under Member Passenger.
- Other infrastructure
• Ensure autonomy, flexibility and accountability at all
• The Freight, Passenger and Suburban divisions will be levels with clear P&L responsibilities.
organised as profit centres. All sub-divisions to be treated
as profit centres. • Make provisions for handling of all parliamentary functions
(liaison functions with government, including handling of
• The two infrastructure divisions— Fixed and other will be Parliament questions) by a Joint Secretary level officer
organised as cost centres. in the Ministry, which would set the RB free to focus
exclusively on business issues.
• All non-core businesses will need to be separated
into a sixth division.
• A Board headed by a Chief Operating Officer (COO) will

manage each of the SBUs. The COO will also represent
the division on the IREB.
Source: The Indian Railways Report 2001: Expert Group on Indian Railways; Report of the Expert Group for Modernisation of Indian Railways, Ministry of Railways, 2012.
business lines (Box 1.34). Annex 1.11 shows several is a concomitant need, in the absence of which the
different forms of Line of business management proposed accounting reforms and the reorganisa-
structures. tion on business lines will not yield the desired
results.
RECOMMENDATIONS
Infrastructure management, freight transporta- Non-transportation tasks: Production Units: A
tion, passenger transportation and miscellaneous review of the railway restructuring experience
activities should similarly be organised as separate across the globe shows that in order to become more
profit-centres by the new IRC. These businesses focused, the Railways in most countries decided to
could be further subdivided in terms of differ- spin off their non-core activities and concentrate on
ent activities. For instance, freight transportation the core business (Box 1.35). For example, railways
could be reorganised in terms of bulk transport in Europe and Japan have long outsourced activities
and non-bulk transport comprising of parcels and like rolling stock manufacturing. Even the Chinese
containers; and passenger transport in terms of Railways has reorganised its rolling stock manufac-
high-speed, intercity, suburban and regional ser- turing operations into separate companies - China
vices. IR should concentrate on providing cost- South Locomotive and Rolling Stock (CSR) and
efficient solutions in each activity by doing its China North Locomotive and Rolling Stock (CNR)
part efficiently and taking the assistance of (established in 2001 from the former China National
private partners or special created SPVs for Railway Locomotive & Rolling Stock Industry Cor-
other activities such as for movement of cont- poration (LORIC)). Considering the serious compe-
ainers and parcels, development and management tition faced by IR in the core transportation busi-
of terminals, marketing, road bridging, etc. In the ness (and the resulting decline in rail modal share of
suburban passenger transport, the attempt should freight), it is imperative that IR critically reviews its
be to achieve physical separation of the long-dis- presence in all the areas falling outside the core trans-
tance network and the suburban network, and its portation operations. As mentioned earlier, the Expert
organisational separation later. Modern account- Group on Indian Railways (2001) had also made a simi-
ing practices would ensure that infrastructure and lar recommendation in its report and noted that:
rolling-stock resources used by these lines of busi-
ness can be properly charged after appropriate and ‘To provide adequate focus on the core business as well
correct costing. as improve flexibility and cost competitiveness, the non-
core activities of the railways will be fully divested over
It is important to mention here that addressing the time, say five years.’
capacity constraint on IR (discussed in Section 5)
NTDPC | RAILWAYS 87

Box 1.34
Freight as a Business Distinct from Passenger Transport
In seven of the eight countries below, rail freight is treated as a separate business from passenger trans-
port. It was not always so; in most countries, the major railway companies once had common business
management of passenger and freight business. Because freight trains and passenger trains run on
the same tracks, railways historically treated them as different parts of the same business, which they
conceived as the business of running trains. Traditional management structures reflected the func-
tional divisions that underpin a ‘train’ business (e.g. track, signaling, locomotives, traffic operations
etc.) and (in larger countries) regional management divisions, similarly organised, as well.
COUNTRY FREIGHT AS A DISTINCT BUSINESS ACTIVITY BUSINESS

SEPARATION
Australia Both in federal and all state contexts (other than in Queensland) the operation of rail Mainly
freight is managed by entities that do not operate passenger services. In Queensland 1990s.
freight is managed as separate division of Queensland Railways.
Brazil Freight Concessions predominate (passenger services are mainly in city areas and are 1990S
run by separate concessions)
Canada Freight companies and passenger company (Via Rail) are separately owned. Via Rail is 1978
a publicly-owned passenger TOC that pays the freight private freight companies for
access
China Still combined: Regional Railway Administrations deliver both freight and passenger N/A
services
Germany The main freight rail operator, DB Schenker is a separate company within the State- 1991
owned DB holding structure and purchases network access from DB Netz, also in the
group.
Japan The Japanese Freight railway Company is a free-standing freight TOC separate from the 1987
6 passenger companies from whom it hires track access.
Russia The Russian Railways Corporation has progressively split Intercity Rail away from 2006
freight. Passenger Branch established 2006. Currently accounting separation only, but
Passenger Brach structured to permit it being split into 5-7 regionally based passenger
companies. Within the freight sector several private freight-only companies have been
established, mainly with trains hauled by RZD.
United States Freight companies and passenger company (Amtrak) are separately managed and 1970
owned. Amtrak is a publicly-owned passenger TOC and pays the private freight compa-
nies for access (at regulated charges).
The Expert Group further recommended that: equipment20. As a result, the Russian railway no long-
‘...that priority candidates for accelerated spin off er has to finance these investments, old rolling stock
would be all the manufacturing units which should be is replaced promptly, and new equipment technologies
done within a specified time limit.’ have been introduced that reduce maintenance costs
and out-of-service time.
Given the massive investment requirement for roll-
ing stock, it is imperative that IR should encourage Globally, there has been a trend towards consolida-
participation of private players (both domestic and tion through mergers and acquisitions. Since the
international) in setting up manufacturing facilities 1990s, a series of mergers and restructurings in
for rolling stock and components. Despite the recom- Europe and North America led to the emergence
mendations available on this issue for quite some now, of three dominant global manufacturers: Bombar-
IR continues to set up new departmental production dier of Canada, Alstom of France, and Siemens of
units, as also attempt setting them up under the PPP Germany. However, over the last decade, while Bom-
model. Leasing of rolling stock, especially wagons, bardier and Alstom have maintained their leading
under the PPP format is another policy enunciated. positions, the two Chinese manufacturers, CSR and
Joint ventures are also being planned. There is thus no CNR, have moved into third and fourth place in the
coherent unified approach. Developing the private rail list of leading global rail equipment manufacturers
equipment ownership and leasing market can help in (by sales in 2009)21.
bringing substantial private investment to the railway
sector (Box 1.37). Private equipment operators in Rus- Recommendations on Production Units: The
sia have invested over US$20 billion in railway freight magnitude of the capacity expansion that is being
20. World Bank (2011).

21. Rennor, Michael and Gardner (2010).

Box 1.35
Focus on Core Business
In all eight countries—Australia, Brazil, Canada, China, Germany, Japan, Russia, and the United
States, the major railway operators have withdrawn from most non-core activities. ‘Core’ is generally
taken to mean the market focus that differentiates a business from its competitors. For freight railways
the core business is delivering competitive transport services through efficient use of railway technol-
ogy. In all the countries in the group, railways, both public and private, once encompassed a range of
activities from which they have now withdrawn.
Three main types were social and recreational services for employees (e.g. housing, schools and hos-
pitals); materials supply and manufacturing (e.g. loco and wagon manufacture, quarries and forests
for track materials); and business support services (e.g. vehicle cleaning, printing, building mainte-
nance). The imperatives of transport competition in the motor age have led the railways to devolve
social services to specialist organisations and ministries and concentrate on sourcing and procuring
railway equipment and support services in the way that will best support the core transport busi-
ness, that is, by competitive tendering among suppliers. North American railways are ‘leanest’ in this
regard. China’s railway still retains ownership of various ancillary companies, though it has divested
most of its social services and major construction and manufacturing activities.
China’s refocusing on core business began in 1998 with reorganisation of several engineering and
rolling stock manufacturing units to create limited liability companies. This was then followed in 2000
by the establishment of six major non-rail companies as independent enterprises, and their trans-
fer to the supervision of the State Large Enterprises Working Committee. Also in 2000, MOR began
transferring the schools, colleges and universities run by Regional Railway Administrations to local
governments and to the Ministry of Education, although it still retained railway management insti-
tutes and colleges to provide occupational qualifications and training for railway staff. This process
was completed in about 2005 when nearly 900 schools, 400 hospitals as well as kindergartens had been
transferred. In 2004, the China Railway Communications Co. Ltd. (CRCC) (which had been established
in 2000 and is responsible for providing railway telecommunications) and China Rail Materials and
Supplies Co. Ltd. (CRMSC) (established in 1988 as the supply and trading agency for the RRAs) were
transferred from MOR to the supervision of the State-owned Assets Supervision and Administration
Commission (SASAC).
Box 1.36
Restructuring the Production Units (PUs)
IR’s production units (PUs) were set up at a time when it had become necessary to develop
indigenous manufacturing capacity. In order to meet the twin objectives that of developing indig-
enous capabilities and conserving scarce foreign exchange the IR were entrusted with task of set-
ting up and managing their own production facilities. Five production units (PUs) were set up during
the period 1950-90: Chittaranjan Locomotive Works (CLW), Chittaranjan, 1950; Integral Coach Factory
(ICF), Perambur, 1955; Diesel Locomotive Works (DLW), Varanasi, 1961; Wheel & Axle Plant, Bangalore,
1984; Rail Coach Factory (RCF), Kapurthala, 1985. These units are managed as departmental undertak-
ings of the Ministry of Railways (MoR), unlike public sector undertakings, which, though owned by
the government, are autonomous corporate entities. The MoR provides the funds through the railway
budget and the accounts are audited by the Comptroller and Auditor General of India.
The units have to follow the policies laid down by the Railway Board (RB) in the matter of procurement
of materials, plant and machinery leaving them with no autonomy in decision making. The RB also
decides on the number and types of locomotives, coaches and wheels & axles to be manufactured each
year, and the PUs formulate their production programmes accordingly. The products manufactured at
(Contd...)
NTDPC | RAILWAYS 89

PUs are supplied to the Indian railways at, what is termed as the ‘transfer price’. This price is worked
out on actual cost basis. It, however, does not include the cost of capital, the profit element and share
of administrative charges.
At present, both IR and its production units are at the crossroads. Because of its weak financial posi-
tion, IR has not been able to make even essential investments in plant and machinery. No wonder, 49
per cent of the ICF’s plant and machinery has outlived its economic life; 16 per cent of the machinery
is over 40 years old. Overage and obsolete equipment require frequent maintenance and additional
staff. Similarly, at the Weel & Axle Plant, most of the machines have outlived their economic life, caus-
ing heavy down time and low quality output.
Over the years, the production units have also developed their own types of vertical integra-
tion. For example, the older plants continue to produce components, which could be easily outsourced
and that too at competitive rates. The result is high cost of production and low levels of productivity.
The availability of capital without a price tag has blurred the PUs’ cost consciousness and
financial accountability. In addition, the sheltered market for their products and absence of compe-
tition do not provide them any motivation for improving quality and upgrading technology, which is
way behind international standards. The production units, by and large, have continued with the tech-
nology and designs initially procured only with some incremental improvements. In the bargain,
they have suffered from technology stagnation for prolonged periods which affected their
export potential.
The world over, major industries including rail equipment industry have been undergoing structural
changes as a result of domestic market developments and globalisation. The process has been large-
ly driven by three factors: technology, capital and competitive pressure. The structural changes
have resulted in the rationalisation and consolidation of the manufacturing activities. All national
railways have hived off their production units into independent enterprises. The initial binds, which
were the raison d’etre for setting up these units, have since lost their validity. The industrial base in the
country has acquired the capability for producing high quality equipment. The ancillary industry has
significantly developed to produce quality products at competitive prices. The private sector that was
earlier reluctant to invest in capital-intensive industries is now willing to do so. It has also developed
managerial and entrepreneurial skills. Time is both ripe and opportune to hive them off into
independent enterprises under a corporate structure. Here it may be clarified that corpora-
tisation of PUs would just be an interim phase. It would subsequently lead to disinvestment and
adoption of some suitable model for restructuring in the follow-up phase. Indeed, there are several
models that have been adopted in different countries.
Source: Improvement of Railway Finances, Hiving off non-core activities, P.K. Malik for ADB.
recommended by the NTDPC and the modernisa- specialised freight wagons, which make intermodal
tion required in all forms of Railways rolling stock transfers easier and more efficient. As mentioned
suggests that there needs to be a corresponding above, we are witnessing the emergence of a few
enhancement and modernisation of the production dominant global manufacturers in the advanced
units producing such rolling stock in the country. As economies along with the rise of couple of Chinese
Indian incomes increase and there is a continuing manufacturers of railways rolling stock. In view of
change in the composition of demand towards more the expansion expected, India should also envisage
comfortable passenger coaches, there will be need the emergence of competitive Indian manufacturers
for widespread replacement of the existing passen- for the railways sector.
ger coaches in the Indian Railways. In addition, with
the kind of passenger shift toward Railways that is The first step in this regard should be the corpora-
envisaged, there will be enhancement in demand tisation of the existing public sector railways pro-
for new coaches. On the freight side, as Dedicated duction units. One possibility could be the setting
Freight Corridors are rolled out, there will be new up of a holding company like the Steel Authority of
demand for freight rolling stock on a continuing India Ltd (SAIL) with each of the production units
basis. Furthermore, as freight transport becomes as they currently exist as subsidiaries of this hold-
more specialised, greater integration takes place in ing company. In order to modernise and expand
freight transportation. As suggested in Chapter 4 these production units, an organised programme
(Integrated Transport: Strategy and Logistics), there should be designed through a PPP framework to
will also be much increased demand for modern and transform them into possible joint ventures in the

Box 1.37
Equipment Ownership and Leasing
Railway rolling stock comprises a major proportion of most railways’ investment portfolio. Reforms
that permit or encourage private investors to purchase railway equipment and lease it to users can
bring substantial private investment to the railway sector. If the railway has insufficient equipment to
meet customer needs, shippers can benefit from purchasing their own freight cars, especially if own-
ing specialised equipment reduces costs or gains a market advantage. Usually, railways offer discounts
on tariffs or transport charges for shippers that invest in rolling stock. The discount level is a deter-
mining factor in shippers’ incentives to invest in rolling stock.
Equipment leasing is a natural extension of private equipment ownership. For railways, equipment
leasing is normally a short-term - between one and seven years - exclusive-use agreement between
equipment investors and customers. Usually longer-term leases, referred to as ‘financial leases,’ are a
mechanism to finance rolling stock. With financial leases, international accounting standards require
that the equipment value is accounted for on the shippers’ books rather than the investors’ books.
To grow and flourish, leasing requires a market ecosystem. Railway tariffs or transport price
discounts must be sufficient to provide investors and shippers with incentives to purchase or lease
rolling stock. Private owner-investors must be able to spread equipment ownership risk across multi-
ple potential customers - shippers, rail operators or forwarders, or other railways – not just the state
owned railway.
The railway benefits from private investment in equipment since it need not secure financing for
rolling stock. . This frees scarce railway capital for use in other areas, such as infrastructure improve-
ment, where it may be harder to attract private investors. Privately owned equipment reduces the need
for railway rolling stock maintenance facilities, and all the cost and capital they require to operate and
renew. Privately owned equipment can yield more transport volume for the railway because it tends
to lock shippers to rail transport and private equipment usually has higher utilisation. Moreover, the
equipment may be newer, more reliable, and provide a better net: tare ratio and suitability for shipper
needs than railway-provided equipment, which is likely more generic.
Shippers benefit from private investment in equipment because the equipment better suits their
needs and its supply is more reliable. The equipment may reduce their overall logistics costs – either
because it is easier to load and unload, or because it has higher capacity than generic railway equip-
ment. Shippers may also benefit from the ability to assemble enough equipment to ship entire train
loads in dedicated service. This not only improves equipment utilisation but also may make the ship-
per eligible for even more economical pricing.
Investors benefit from owning equipment by earning good returns. In a market of multiple ship-
per/customers, investors can spread their risks. Moreover, higher equipment productivity permits
shippers to move higher volumes, which reduces overall costs for equipment investment - compared to
full railway pricing or to equipment-lease payments.
Source: Railway Reform: Toolkit for improving rail sector performance, The World Bank, 2011.
first instance. As expertise is developed in these pro- within a holding company structure, such as SAIL,
duction units, we can expect a trend of consolidation and the plans drawn up for their expansion and
through mergers and acquisitions of these joint modernisation to emerge as globally competitive
sector units or public sector units along with any players.
other private sector companies that may emerge in
this area. Given the size of Indian Railways system Recommendations on Other Service Activities:
and its envisaged expansion, there is no reason why All activities falling outside the core transportation
Indian production of railways rolling stock should and manufacturing operations should be critically
not be among the most competitive in the world. reviewed from the perspective of either retention
or outsourcing. Outsourcing would be a solution for
In summary, the NTDPC recommends that all the the activities that are required for transportation
production units of the Railways be corporatised service but can be done by another agency more
NTDPC | RAILWAYS 91

efficiently and at lesser cost (e.g. cleaning of coach- investment to be included in the Works and Roll-
es, provision of linen in trains, etc.). ing Stock Programmes irrespective of the size of
investment should give way to a more decentralised
There are also activities that are amenable and emi- decision making at the zonal level. Simultaneously,
nently suited to commercialisation and yet suffer the Zonal Railways would be made accountable for
from loss of focus being confined to a small part of return on capital, transport output, profitability
the railway’s operations at present. In the past, rail- and safety. An enabling framework can be created to
ways have benefited from corporatisation of such stimulate internal competition among Zonal Rail-
activities as project/technical consultancy, con- ways with incentives and bonuses for high perform-
struction, container transportation, telecom servic- ers. Box 1.40 shows the improvement in financial
es, etc. Going forward, parcel service management performance achieved as a result of managerial
would be an ideal candidate for corporatisation. decentralisation undertaken in China.
Other activities of similar nature could also be
considered. In several railways, for instance Chi- The proposals above on the empowerment of Zonal
nese Railways and Japanese Railways, transpor- Railways should be implemented as preparation
tation of special cargo (container, special freight for their functioning within an overall corporate
and parcel), construction of railway infrastructure framework is carried out as proposed above for
and management of stations have been success- Railways re-organisation.
fully implemented to facilitate quick upgrade of
technology, independent R&D and sharpen focus on Public Private Partnership (PPP): Investment in
upgrade of passenger facilities and revenue genera- infrastructure in India is increasingly being done
tion. through public private partnerships (PPP). The con-
cept is now also being extended to railways infrastruc-
Railways have been experimenting with outsourc- tural investments. As noted earlier, most railways in
ing a number of activities. Examples are: onboard the world are run as government owned corporations,
cleaning, supply of linen in trains, station cleaning, with the exception of the United States. Thus, exten-
etc. The results have not always been satisfactory. In sion of the PPP concept to the railways while desir-
fact, some of the outsourcing activities have given able, has to be done carefully.
rise to a large number of complaints from custom-
ers. This, however, does not make a case against A thorough review of the experience of PPP pro-
outsourcing. However, it demonstrates the need for jects so far needs to be undertaken. Organisational
seeking professional help and guidance in design- and institutional deficiencies inhibiting PPP need
ing outsourcing modules and monitoring perfor- to be identified and addressed. Clear-cut empower-
mance post-outsourcing. ment and accountability for PPP projects need to
be established. Decision-making for PPP projects
Chapter 4, Volume II (Integrated Transport: Strat- needs to be streamlined. Capacity building for offic-
egy and Logistics) details the kind of logistics sys- ers handling PPP projects both at the ministry and
tems that we can expect in the transport sector. The the field level needs to be taken up with help of
outsourcing activities mentioned above need to take professional bodies. Standardised documents bal-
cognizance of the emergence of these integrated ancing risks and interests of private partners must
logistics companies and take advantage of the kind be prepared in advance to avoid delay in decision
of services that they provide. making in the course of the bidding/award pro-
cess. The existing PPP policy framework should be
Empowerment of Zonal Railways: It is essen- reviewed in the light of hitherto poor response and
tial that the organisational reforms be extended PPP experience.
to the Regional/Zonal level. The recommendations
of the Expert Group on Railways (2001) and the The recommendations of the Dr. Pitroda Committee
HLSRC (2012), with respect to empowerment at with regard to improving the environment for PPPs
working level have been summarised below (Boxes should be implemented (Box 1.41).
1.38 and 1.39).
Recommendations for Zonal Railways: GMs of SUMMARY OF RECOMMENDATIONS

Zonal Railways could be empowered to take deci-
sions that enhance the revenue, reduce costs or The Indian Railways, with its network of about
build platforms for higher growth in future. For 65,000 route km, plays a crucial role in integra-
example, if a freight bye-pass or traffic facility ting the social, political and economic life of
work or a signalling change can increase capacity the country. IR forms the backbone of India’s
or remove a bottleneck, GMs could have the power transport infrastructure; facilitating industrial
to take such decisions without reference to Railway and economic development by transporting about
Board within a framework of rules and investment 33 per cent of the total freight traffic (NTKMs),
limits. The present system of seeking sanction for while simultaneously meeting the transportation

Box 1.38
Revamp Regions/Zones: The Expert Group on Indian Railways (2001)
The restructuring process will be extended to the Regional/Zonal level. A Zonal Management Commit-
tee comprising 4 General Managers (GMs) one each from the Freight, Passenger and Infrastructure
Fixed and Infrastructure other Strategic Business Units (SBUs), will have the responsibility of manag-
ing the zone. The Zonal GM will report directly to the COO of their respective SBUs. Greater powers
will be given to the Zonal GMs to allow them to take independent decisions regarding their own SBUs.
Decisions regarding sharing of common facilities, infrastructure will be taken jointly by the Zonal
Management Committee. Guidelines to facilitate decision making by the Zonal Management Commit-
tee will be laid down in line with the principles established by the Railway Executive Board.
Source: The Indian Railways Report 2001: Expert Group on Indian Railways
Box 1.39
Recommendations of HLSRC Regarding Empowerment at Working Level
Enhanced powers should be delegated to GMs and DRMs in regard to safety matters as under:
• Powers of General Managers to be enhanced to 3 times for sanction of works under all Plan
Heads except New Lines and M & P items. These should also be applicable under out-of-turn
basis, depending on the urgency. Powers of DRMs also to be accordingly enhanced to 3 times.
• General Managers to be given full powers for re-appropriation of funds from one work to anoth-
er under the same Plan Head and source of funds under all the Plan Heads, except New Lines.
• General Managers to have full powers to re-appropriate funds under Revenue under the same
Demand from one PU to another within the overall budget allotment.
• DRMs to be fully empowered to decide the process/procedure such as Spot Purchase Committee,
Single/Limited Tenders, etc.
• DRMs to have full powers:
- To accept tenders floated by the division
- To enter into repair or Annual Maintenance Contracts through OEM or otherwise
- To purchase stock items in case of shortages and non-stock items upto Rs 0.3 million per case
but without any monthly ceiling
• DRMs to be empowered to award works of essential nature related to operation and mainte-
nance assets on quotation basis for 3 months as a stop gap arrangement.
• DRMs to have full powers for hiring of resources including utility vehicles.
• DRMs to have full powers to sanction construction of RUBs, limited height subways and ROB
under Road Safety works.
• Powers those vested with DRMs of the Division to be enjoyed by the Chief Workshop Managers
in respect of their workshops.
• Powers to sanction cash awards for good performance in safety related matters should be
enhanced to three times.
• Enhanced delegation of powers to the divisions should be directly mandated by the Railway
Board as a onetime measure.
needs of the people across the length and breadth addition of new lines on uneconomic routes. Pres-
of the country. ently, the network of IR is plagued by infrastruc-
ture and carrying capacity constraints and most of
However, Indian Railways has suffered from the the routes on the high density network (HDN) have
absence of a comprehensive framework for capac- already reached saturation in line capacity utilisa-
ity expansion over the last 60 years. Consequently, tion. The expenditure on railways as a percentage of
only incremental changes have taken place through total transport sector expenditure has declined con-
gauge conversion, doubling of lines, some moderni- siderably over the last two decades. Moreover, while
sation of signalling, etc.; along with continuous IR has been suffering from severe capacity con-
NTDPC | RAILWAYS 93

Box 1.40
Managerial Decentralisation in China
China has increasingly tried to commercialise its Regional Railway Authorities but without establish-
ing them as corporations. The introduction of Assets Operation Liability System (AOLS) in 1999 was
a key step in managerial decentralisation by making Regional Railway Administration managements
responsible for managing and increasing the value of the assets assigned to them. AOLS sets bonuses
in relation to three targets and two commitments. The three targets are: to increase the net worth of
the RRA; to make profits, expressed as a percentage of the RRA’s gross operating assets; and to return
dividends to MOR, expressed as a percentage of MOR’s capital investment. The two commitments
made by RRAs are: to operate safely; and to achieve a specified minimum increase in RRA profits or
reduction in RRA losses. Under AOLS, each member of RRA management (as far down as stationmas-
ter) puts up an incentive deposit, the size of which depends on rank. The deposit is forfeited if the
targets and commitments are not met. For target-beating performance, the manager gets the deposit
back, plus a bonus equal to up to twice the deposit. During the eight years that ALOS has been in place,
there has been a steady improvement in the financial performance of the RRAs (and of CR as a whole)
as well as a significant improvement in safety, with the number of accidents reducing. Most RRAs now
achieve the higher levels of bonus.
Box 1.41
Organisation for PPP: Recommendations of the Expert Group for
Modernisation of Indian Railways (2012)
• Create a post of Member (PPP) responsible for project development and processing of all PPP pro-
jects to facilitate their speedy sanction by the Government and award of concession. The Member
should have a multi disciplinary team of officers, including finance, to deal with various railway
projects.
• Establish a Committee for approval of PPP projects to be headed by Chairman Railway Board with
Financial Commissioner, Member (PPP) and the concerned member to whose area of responsibil-
ity the project belongs. The process and procedure followed should be similar to that of PPPAC fol-
lowed in Government of India. The Board should decide and approve the projects and they should
not be examined or referred back by the members to their respective directorates. The projects
thereafter should follow the normal procedure of approval by PPPAC and CCI.
• Appoint a ‘PPP Ombudsman’ to resolve any disputes that may arise between the private sector
and the government in interpretation and enforcement of provisions of the agreements. The
Ombudsman should be a quasi judicial authority and should have the authority to give directions
which are binding on all parties.
• Constitute a Railways Tariff Regulatory Authority in order to provide a level playing field to all
stakeholders.
• Build capacity for the officers at the Zonal railways to manage PPP projects. A PPP cell should be
constituted in each zone to identify, develop, implement and monitor projects at the zonal level.
straints and remains underinvested, the road sector goods transported over the last 60 years. The non-
has witnessed a surge in investments (both public optimal intermodal distribution is estimated to cause
and private). The launch of the ambitious National a loss of about 4.5 per cent of GDP to the nation’s
Highways Development Project (NHDP) brought economy. It is essential that an attempt is made to
about a phenomenal improvement in the national reverse this declining trend in railway’s share or,
highways. at a minimum, to arrest it. If this is not done, the
progressive achievements of the NHDP will only
As a result of the severe capacity constraints and accelerate the loss in the railways’ transport share
distortions in relative allocation of resources, IR leading to greater pollution and environmental deg-
has seen a fall in the share of both passengers and radation.

Thus, the key issue facing the country relates to the powers endowed to the Railways under the current
desired strategy for capacity expansion of the rail- Act. Existing railways corporations such as CON-
ways over the next 20 years. All projections for the COR, DFCCIL, and the like will become subsidiaries
growth in demand for both freight and long distance or joint ventures of the IRC.
passenger services suggest that overall economic
growth could be stymied if appropriate strategic For these reforms to be implemented, the Railways
choices are not made now to facilitate significant Act, 1989, and the Indian Railway Board Act, 1905,
capacity expansion of the railways. If consistent will have to be amended accordingly.
economic growth of 7-10 per cent per annum is to be
achieved over the next 20 years, there is a pressing These reforms will be very complex and the NTDPC
need for unprecedented capacity expansion of the recommends widespread consultation with major
railways for both freight and passenger traffic in a stakeholders including the staff and unions of the
manner that has not taken place since independence. railways system. This process may take upto 5 years.
During this period, the Railway Board should be
The massive capacity expansion, as envisaged, reorganised along business lines consistent with the
will not take place in a business as usual sce- recommendations of the 2001 Expert Group on Indi-
nario. Hence it is of the utmost importance an Railways and those of the 2012 Expert Group for
that a vision similar to that of NHDP is laid down for Modernisation of Indian Railways.
railways so that we may expect a transformed rail-
way network by 2032. This will have to be supported The NTDPC also recommends the corporatisation
by (a) the required organisational changes, and (b) of the existing public sector Railways Production
certain strategic decisions in terms of the relative allo- Units. Each of the production units could be set
cation of resources between rail and road. up as a corporate subsidiary of a holding company
that oversees all the production units. Plan should
Choices will need to be made on the priorities to be be drawn for their expansion and modernisation to
placed on different investments. This implies some emerge as globally competitive players.
judgment on the normative modal shares that are
desired for rail, road, air, shipping, and inland water- To facilitate these reforms, the NTDPC recomm-
way traffic. At present, this prioritisation and deci- ends that the Railways should undertake recas-
sion-making are disjointed. A coordinated approach ting of its accounts in a company account format
needs to be taken focusing on significant augmenta- consistent with accounting norms under the Indian
tion of technical capacity, investments in capacity GAAP. This is feasible to do since it has already been
building and R&D, executing the required organisa- on a pilot basis twice: first by the Railways Capital
tional reforms and accounting reforms, setting up Restructuring Committee of 1994 and the Expert
of the rail tariff authority, among other things. The Group of 2001.
important recommendations for each of these areas
are summarised below: Furthermore, in preparation of the overall corpora-
tisation of the railways system, the existing organi-
ORGANISATIONAL REFORMS sation of the Railways needs to be reorganised on
business lines. Indian Railways is presently organ-
The key issue to be addressed in the reform of Indi- ised in terms of several functional departments like
an Railways is the institutional separation of roles Civil Engineering, Mechanical Engineering, Elec-
into policy, regulatory and management functions. trical Engineering, Signal and Telecom. It should
Currently, these roles are blurred with the Railway be reorganised in terms of business lines such as
Board essentially performing all the three roles put infrastructure management, freight transportation,
together. This causes confusion about the under- passenger transportation, parcel and miscellaneous
lying vision and mission of the Indian Railways. activities should similarly be organised as separate
Consistent with Railways reforms in other major profit-centres by IR.
countries and with those in other infrastructure sec-
tors in India, the NTDPC recommends the separa- All activities falling outside the core transportation
tion of Railways management and operations from operations should be critically reviewed from the
the Government. The Ministry of Railways (or the perspective of either retention or outsourcing.
unified Ministry of Transport) in the future should
be limited to setting policies; a new Railways Regu- GMs of Zonal Railways to be empowered to take deci-
latory Authority would be responsible for overall sions that enhance revenue, reduce costs or build
regulation, including the setting of tariffs; and the platform for higher growth in future. GMs should
management and operations should be carried out have the power to take such decisions without refer-
by a corporatised entity, the Indian Railways Corpo- ence to Railway Board within a framework of rules
ration (IRC) to be set up as a statutory corporation, and investment limits. Simultaneously, the Zonal
which would retain many of the quasi governmental
NTDPC | RAILWAYS 95

The existing Railways Production Units should • Development of last mile connectivity on PPP
be corporatised. Each could be set up as a in a time-bound manner
corporate subsidiary of a holding company • Running of freight trains at 100 km per
hour.
that oversees all the units. • Running of premium freight services with
differential pricing and assured deliveries.
Railways would be made accountable for return on • Supply of rakes on demand with differential
capital, transport output, profitability and safety. pricing for different demand lead times.
• Running of trains on schedule with guaran-
Organisational and institutional deficiencies inhib- teed transit time.
iting PPP need to be identified and addressed. Deci- • Running of automobile, hazardous material
sion-making for PPP projects needs to be stream- trains, movement of bulk cement, etc by pri-
lined. Capacity building for officers handling PPP vate train operators.
projects both at the ministry and the field level needs • Reduction in cargo parcel size to 1,000 tonnes
to be taken up with help of professional bodies. The and aggregation mechanism for even smaller
existing PPP policy framework should be reviewed parcel-sizes.
in the light of hitherto poor response and PPP expe- • Indian Railways to work closely with state
rience and city authorities to set up rail-based multi-
modal logistics parks to attract increasing
GOALS FOR 2032, STRATEGIC PLAN AND BUSI- volumes of miscellaneous cargo to rail.
NESS STRATEGY
PASSENGER BUSINESS STRATEGY
Optimal market share in freight: Aim to attain
50 per cent market share in inter-regional freight • Upgrade speed to 160-200 kmph on select cor-
traffic by 2032, up from the current level of about ridors.
33 per cent. • Shift of focus to long-distance and inter-city
transport and suburban corridors involving
Indian Railways to satisfy passenger service demand dense passenger movements.
in full. • Redevelopment of stations for smooth flow
and comfortable experience of passengers
A shift of long-distance (500 km and above) transport as also to ensure clean and hygienic environ-
of parcels - essentially non-bulk packaged items - to ment.
rail is a must. • Redesign of coaches to enhance travel com-
fort.
Indian Railways to institutionalise a strategic plan- • Conversion of all stopping passenger trains
ning process taking a forward view over the next 20 to EMUs/DMUs or railcars; invitation to state
years. The strategic plan has to be necessarily pre- governments to manage uneconomic and un-
pared involving the Zonal Railways and key stake- patronised services.
holders and will clearly lay down the goals to be • Augmentation of supply (more trains and
aimed at and attained and the path to be traversed. longer trains) to ensure full satisfaction of
A multi-year investment plan fully supported by a demand.
credible funding plan will form the bedrock of the
strategic plan. CAPACITY CREATION
FREIGHT AND PARCEL BUSINESS STRATEGY Construction of 6 Dedicated Freight Corridors

on top priority. The Eastern DFC must be given
• Indian Railways to capture a significant share the highest priority among the DFCs, and should be
of the fast-growing FMCG, Consumer Durable completed within the 12th Five Year Plan. Further,
and Information Technology (CDIT), contain- construction of Eastern, East-West and East Coast
erised cargo and other segments like automo- DFCs must start from the eastern end. Private sec-
biles, etc., where its presence is negligible. In tor participation should be encouraged for develop-
this regard an organised intermodal transport ment and operations of the DFCs.
system which will combine the advantages of
rail with that of road is needed. Eight critical feeder routes for coal with a combined
• Setting up of a focused business organisation length of about 600 km and several other critical
for multimodal transport of non-bulk com- links for the steel industry with a combined length
modities (e.g. parcels) under the PPP mode, of about 2,340 km must be completed on the highest
combining the efficiency and advantages of priority within the 12th FYP.
rail and road.
• Development of a few selected corridors for Improved connectivity to industry clusters as well
heavy-haul operations. as significant ports (major and non-major), based on

their current and projected traffic volumes. Devel- IR should physically separate the long-
opment of last-mile connectivity should be encour- distance and suburban networks. A separate
aged through PPPs. organisation should be created for suburban
Development of 15 to 20 logistics parks as the main services with freedom to coordinate with state
network hubs viz. Mumbai Bangalore, Cochin, governments for connectivity/integration.
Hyderabad, Kolkata, Delhi NCR, Ahmedabad, Nag-
pur, Vishakhapatnam, Siliguri, etc.
Given the massive investment requirement for roll- transport, as compared to projects such as HSR net-
ing stock, the capacity for manufacturing rolling work which require continuous fiscal support.
stock and components must be increased substan-
tially. A programme for raising speed to 160-200 kmph on
selected existing routes should be undertaken, till
Upgrade wagons and track to 25-tonne axle load. the time the HSR projects are found commercially
justified or operationally required to cater to the
Upgrade rail wagons (higher axle load , better tare- country’s growth and mobility needs.
to-payload by shifting away from carbon steel to
stainless steel and aluminium/ other light-weight IR should encourage participation of private play-
bodies, increased payload of covered wagons (BCN) ers (both domestic and international) in setting up
through use of well wagons, better maintenance manufacturing facilities for rolling stock and compo-
cycles, etc). nents. This would facilitate induction of world-class
technology, besides being a source of capital for the
Expand partnership with private sector to facilitate resource constrained IR.
development of private freight terminals, operation
of container, automobile and special freight trains Replacement and renewal of assets should be
and third-party leasing of wagons. ensured. The ad hoc approach presently followed
in respect of appropriation to Depreciation Reserve
IR should achieve physical separation of the long Fund needs to be overhauled and a rule-based
distance network and the suburban network. The approach needs to be put in place.
segregation of suburban and long distance passen-
ger/freight traffic is necessary for efficient provi- PROJECT EXECUTION
sion of commuter service. A separate organisation
should be created for suburban services with free- Considering the need for massive capacity aug-
dom to coordinate with state governments for con- mentation over the next 20 years, a separate body/
nectivity/integration. organisation, partially independent of the Ministry
of Railways should be set up to expedite the delivery
Development of select High Speed Corridors (speed of projects. All works having a budget outlay of more
potential 350 Kmph) on a pilot basis, if and when than Rs 5 billion (or may be Rs 10 billion) should be
deemed to be economically viable. entrusted to an ‘Authority’, which may be called the
‘National Railway Construction Authority’ (NRCA).
INVESTMENT PLANNING The NRCA would be an umbrella organisation hav-
ing a national level presence, fully autonomous, and
IR needs to shift to a programme approach from the having extensive powers for award of works. It will
current project-oriented approach. award contracts for construction, supervise quality
of construction and would ensure smooth flow of
Quick pay-off projects that can ease the capacity con- funds for the works to continue unimpeded. Repay-
straint the fastest should be prioritised. ment of loans, tax-free bonds, etc. would be chan-
nelised through it.
Investment should be focused on total capacity crea-
tion including rolling stock, asset renewal, technol- All capacity enhancement projects should be taken
ogy induction, information technology, identified up after ensuring that funding is earmarked for each
investments in modernisation, etc. project. The concept of financial close may be intro-
duced for each project.
A more integrated approach is required to be taken
of transport as a whole and choices will need to be Project teams to be held accountable for timely com-
made on the priorities to be placed on different invest- pletion of the projects. Project managers to continue
ments. Priority should be given to projects such as in their positions till project completion. Perfor-
DFCs which are self financing and critical to achieve mance-linked incentives should be provided and pen-
the target of 50 per cent share of railways in freight alties for failure should also be imposed.
NTDPC | RAILWAYS 97

A comprehensive railway safety policy with Governing Council and will be chaired by an eminent
measurable indicators for evaluation for a five- technologist/scientist, with the Chairman and Tech-
year and 10-year period must be announced nical Members of the Railway Board as its members.
RRDC shall provide the perspective plan stretching
before the end of 2015 over a reasonable period of 10 years for research and
development needed for the Railways. The Director
General of the proposed RRDI, the Director General
TARIFF of RDSO and 2 Directors of the proposed Academic
Centres of Excellence shall also be ex-officio mem-
As has already been approved by the Government, bers. It will also have one representative each from
independent Rail Tariff Authority should be set up the academic world and research organisations.
with the mandate of fixation of rates and fares.
Establish Railway Research and Development
As the overall railways reform proceeds, this Author- Institute (RRDI), a multidisciplinary research
ity can be changed into an overall Railways Regula- organisation for applied research on current con-
tory Authority which would encompass tariff set- cerns and future technology development for Rail-
ting, along with other regulatory functions. ways. The RRDI should be supported by six or seven
Service-based pricing to attract traffic for bagged Regional Railways Institutes, which focus on the
bulk commodities and non-bulk commodities. research requirements specific to their region. The
head of the RRDI should report directly to the Minis-
A realistic programme of fare revision should be ter of Railways or the CRB. It should target recruit-
designed to reduce/eliminate the losses on passen- ing close to 300 researcher professionals by the end
ger services. The government may subsidise up to 25 of the 13th Plan, with a healthy mix of Ph.D. degree
per cent of the costs of Suburban railways and no holders, engineers, architects, professors from
subsidy should be provided for non-suburban rail- national and international universities etc.
ways.
Establish Academic Centres of Excellence or
SAFETY Railway Research Centres (RRCs) in at least 13
technical institutes and at least two IIMs by 2020.
Establish a National Board for Rail Safety which is These should be in the nature of full scale research
independent of the operational agencies to avoid centres where faculty can interact within a sizeable
conflict of interest. The CEO of the Board should be group. The RRCs should be provided grants in aid for
of a rank of Secretary to the government of India establishment expenses, building, facilities, labora-
and should report directly to the Railway Minister. tory, equipment etc. In addition to equipment, sup-
The Board will also conduct statutory inquiries into plies, travel and research funds, the funding must
train accidents occurring on the Indian Railways, include 5-10 endowed permanent Chairs and 10-20
presently being conducted by the Commissioner of endowed post-graduate scholarships.
Railway Safety.
The functions of the RDSO should be completely
Establish/strengthen Safety Department within redefined and actions should be initiated to revital-
operating agencies (at different levels—Railway ise and strengthen it. RDSO should involve itself
Board, Railway Regional headquarters) for ensuring with only technology upgradation, implementation
day-to-day compliance with safety standards, study- and setting of standards; it should not be responsible
ing effectiveness of existing policies and standards, for inspection.
conducting safety audits, collecting relevant data,
etc. Manufacturers of railway products to be involved
in R&D for both new technologies as well as for
A railway safety policy with measurable indicators improvement of existing systems and products. Set-
for evaluation for a five-year and 10-year period must ting up of new units with participation of private
be announced before the end of 2015. sector would also be useful in ensuring technologi-
cal upgradation.
Reform data collection and analysis procedures for
traffic accidents in consonance with international Result-oriented research teams should be set up to
practices at different levels: National broad-based work on specified research projects. Such teams may
data, detailed survey systems for fatal cases, sam- include participants from outside IR, including from
pling systems for medical data, etc. research/academic institutions and OEMs, contract-
ed for the duration of the project.
RESEARCH AND DEVELOPMENT (R&D)
An Integrated Energy Management System (IEMS)
Establish Railway Research and Development need to be set up under a separate directorate in the
Council (RRDC), an apex body that will replace the Railway Board.

INTERNATIONAL RAIL LINKAGE Organisation(s) for operationalising ICT applica-
tions at field level should be converted into autono-
IR should exhibit greater urgency and expedite the mous bodies.
execution and operationalisation of identified inter-
country connectivity projects as well as the execution IR Institute of Transport Management (IRITM)
of bilateral agreements, for smooth and seamless should be entrusted with the task of human resource
movement of intra-regional traffic among neighbour- development.
ing countries. It is recommended that IR should give
top-most priority to the projects to be taken up with HUMAN RESOURCES
Nepal and Bangladesh
Multiple services and cadres of Railways at the
Improvements in rail connectivity with neighbour- management level need to be rationalised and coa-
ing countries required on diplomatic and politi- lesced into fewer services in preparation of and to
cal considerations should be fully funded by the be consistent with the overall railways reform being
exchequer. proposed. The recruitment to the railway cadres of
officers should be totally dissociated from the Civil
OPTIMISATION OF LAND USE Services and Central Engineering Services exams.
The SCRA exam should be upgraded to recruit can-
Infrastructure Corridors: Suitable directives to be didates, who are already graduates, to two streams
established whereby whenever a new transport of Railway Service viz. Indian Railway Technical
infrastructure—rail or highway—is built, the corri- Service and Indian Railway Logistics Service, while
dor must provide for segments of the infrastructure, overall reform is undertaken.
i.e. if a new port comes up, the rail connectivity must
be in a corridor that also provides for highway, pow- Induction of unskilled staff to be reduced and gradu-
er lines, combined terminals, etc. ally done away with.
Schedule of Dimension (SOD) and Maximum Mov- The recruitment processes to be supplemented by
ing Dimension (MMD) improvement should be well researched and meticulously developed induc-
undertaken. tion and in service training to constantly upgrade
the skills of employees.
A standard template can be developed for redesign
and redevelopment of the stations that maximises Recruitment of highly qualified PhDs from IIMs/IITs
comfort for commuters and create space for premi- and lateral recruitment from market would be consid-
um retail in station premises. ered for specialist functions with suitable compensa-
tion.
INFORMATION TECHNOLOGY
A system of reward for collective performance and
Computer and Information Systems (C&IS) directo- variable pay linked to incremental surplus generated
rate at the Railway Board should be greatly enhanced by various units to be implemented.
as to encompass the entire gamut of ICT applications
on the network.
Centre for Railway Information Systems (CRIS)

should be converted from a society to a non-profit
company with much greater freedom.
NTDPC | RAILWAYS 99

Annex 1.1
International Comparison of Modal Share of Domestic Freight
The modal share of rail freight ranges from only 3 per cent in Japan to around 65 per cent in Russia.
Although the range of traffic types carried by railways in each country is similar, the overall contri-
bution to the domestic freight task differs in each country. The proportion is influenced by manage-
ment performance and also by (a) the actual freight markets offering and whether they are suited to
railways; and (b) the existence and extent of domestic waterborne transport (coastal shipping and/or
inland waterways). Since railways and these waterway services target many of the same market seg-
ments a large commercial waterway sector will significantly constrain railway modal share. The table
below summarises some of the country specific factors involved:
COUNTRY MODAL SHARE* OF DOMESTIC FREIGHT (EXCLUDING PIPELINES)
Railways carry about 44 per cent of domestic freight. Because of concentration of population and industry
Australia around the coast, the coastal shipping industry carries a substantial 20 per cent.
Railways carry about 66 per cent of domestic freight. The high market share is influenced by Canada’s long east-
Canada west distances, but water transport (coastal shipping and St Lawrence/ Lakes transport) is significant with about
12 per cent modal share.
Railways carry about 51 per cent of domestic freight. Waterways (including both coastal shipping and over
China 24,000km of commercially significant inland waterways) perform a very large role in China carrying about 27 per
cent of traffic.
Railways carry about 19 per cent of domestic freight. Germany has little bulk traffic and faces rather short rail
Germany distances; it also has an extensive inland waterway network consisting of the Rhine River and its tributaries, and a
solid canal network, which together carry about 18 per cent of freight.
Railways carry about 3 per cent of domestic freight; because of its island geography, coastal shipping is the over-
Japan whelmingly dominant carrier with 58 per cent modal share.
Railways carry about 65 per cent of total freight. Russia’s main waterways are south-north (which is contrary to
Russia main traffic flows); also the long east-west distances and relatively poor east-west road system contribute to the
very high railway modal share.
Railways carry about 44 per cent of total domestic freight. The USA has important coastal shipping links and
United about 12,000 km of commercially significant inland waterways (dominated by the Mississippi-Missouri river
States systems), which together carry about 25 per cent of freight.
China, Germany, Japan and Russia are, like India, mixed-use railways with significant freight volume
but also heavy passenger train use of the network. By contrast, Australia, Brazil, Canada and the USA
have only marginal passenger train activity outside the cities. Not having to share the network with
a substantial passenger rail service affords both institutional and operational freedom on rail freight
service. Nevertheless, the freight railways in those countries contain some of the most efficient land-
based freight operations in the world and much of this experience is equally valid for mixed-use rail
systems.
Note: Modal share does not equate to market share. Different modes can only ‘share’ markets where they exist as viable alternatives in those markets. The market reach
of road networks is much greater than of railway systems, and that of rail systems exceeds that of waterway networks.

Annex 1.2
Routes Suggested for Increasing Maximum Permissible Speed to
160-200 kmph
AFGHANI STAN
JAMMU & KASHMIR
HIMACHAL CHINA
PRADESH
PAKISTAN Jalandhar
PUNJAB Ambala
Bhatinda UTTARAKHAND
Roorkee
HARYANA
Dadri NEPAL
Mathura ARUNA CHAL
PRADESH
Shahjahanpur
Ajmer Lucknow
Jodhpur Dholpur
UTTAR
RAJ ASTHAN PRADESH AS SAM
Kanpur BIHAR MANIPUR
Kota TRIPURA
Vijaypur BANGLADESH MIZORAM

Kandla
Mundra JHARKHAND
MADHYA PRADESH
WE ST MYANMAR
Jamnagar GUJAR AT Bhopal BENGA L (BURMA)
CHHATTISGARH
Manmad
Mumbai MAHAR ASHTRA BAY OF BENGA L
Pune
Hyderabad
ANDHRA
PRADESH
GOA
ARABIAN SEA KARN ATAKA
Chennai
BENGALURU
Mangalore
LAKS HADWEEP TAMIL

NADU Trichy
KERALA
Karur
Kochi
NTDPC | RAILWAYS 101

Annex 1.3
Forms of Government Financial Support of Railway Passenger Services
TYPE CHINA GERMANY JAPAN RUSSIA
Compensation for Minor (less than 2 per cent of sec-

carriage of spe- No ond class revenue on long-distance No Yes
cific user groups services)
Contract payments from regional Contributions towards regional
Specific operating No administrations for public service No companies from corresponding
subsidies contracts regional administrations
Deficit support of passenger
General operating No No No revenue shortfalls during reform
subsidies process.
The fees for rail
Replacement infrastructure invest- company use of
ments, set out in a performance For projects contained in the fed-
Grants for build- many high speed
Specific capital agreement with govt. Interest free eral target programme. For ‘special’
ing new lines to lines are set at
support loans and grants towards projects projects (currently dominated by
remote areas less than full com-
included in the federal transport Olympic projects)
mercial rates on
infrastructure plan some lines.
General capital Equity injections for maintenance
No No No
support repair and rehab.
Freight services
Support from pay disproportion- Freight services pay disproportion-
No No
freight services ate share network ate share of network costs
costs
Source: Passenger Railway Institutions and Financing: China, Germany, Japan and the Russian Federation, Paul F. Amos, 5 September 2011.
Japan’s Funding System
Japan’s passenger railway sector is operated by private companies according to commercial

principles. The three major, privately-owned, JR companies must fully cover the train operating and
network infrastructure costs of their operations with commercial revenues, and finance their own
capital programmes. They receive no revenue subsidies from the Japanese Government and must
finance their own infrastructure development programmes, though special provisions apply to the
development of the Shinkansen Network.
Most of the companies have diversified into a wider range of non-railway (and non-transport)
businesses. These include businesses based on use of railway property and air-rights. The many non-
JR companies generally earn an even greater share of revenue from non-transport businesses. The
financial performance of the largest JR passenger company, the East Japan Railway Company (EJRC),
is illustrative of the financial structure of the passenger railway industry in Japan. Of its operating
income around two-thirds is earned from transport (mainly railways but including bus services and
the Tokyo monorail), 9 percent from commercial exploitation of its own stations, 18 percent from other
shopping and office centres, and 9 percent from various ancillary businesses. The company has 75 sub-
sidiaries in all (each of its 25 shopping malls is managed by a separate subsidiary).
Although commercially independent, the Japanese Government imposes a number of general

obligations on the JR passenger railway companies, including appropriate setting of passenger
fares and rates structure; facilitation of smooth inter-company transfers by passengers; maintenance
of the currently operated railway routes with due notification and process if line closure is envisaged
or stations and other railway facilities are to be developed; and consideration of the impact of com-
pany diversification plans on small and medium-sized enterprises engaged in similar business in the
same areas to avoid unfair impact.
The government is involved in financing the Shinkansen (bullet train) network. The Tokaido
Shinkansen, a 515 km high-speed passenger-dedicated line opened in 1964. This first route was a
financial success and by 1967 revenue exceeded operating costs, including interest and depreciation.
The succeeding Shinkansen lines, while generally earning sufficient to cover operating and mainte
(Contd...)

nance costs, were less heavily used and able to contribute little towards capital recovery. Shinkansen-
related debt was JPY 5.7 trillion by 1987 and Japanese National Railways were wound up with a signifi-
cant portion of this debt relieved.
The capital cost of new Shinkansen railway construction projects is now shared by the
national government (two-thirds) and local governments (one-third) along the railway lines.
The railways are constructed and owned by a government corporation but managed and operated by
the companies. Passenger railway companies pay a levy for the use of this infrastructure. The maxi-
mum charge is equal to the profits from the new Shinkansen operations. Therefore decisions to build
new lines involve a detailed appraisal of the impact on the profitability of the railway company. A little
more than half of the national government funding comes from the payments received from compa-
nies for use of existing Shinkansen lines while the remainder comes from Japan’s General Account.
Russia’s Funding Structures
The Russian passenger railway sector has undergone reforms over a period of 10 years from
2001 to convert the railway sector from the wholly vertically and horizontally integrated structure
inherited from the Soviet Union to one based on commercial, corporatised structures focused on spe-
cific business activities and private sector participation in train operations. Prior to the 2010 reforms,
passenger services were run directly by Joint Stock Company Russian Railways (RZD – a defined ‘stra-
tegic’ company whose shares were owned by the Russian Federation). As part of reforms RZD trans-
ferred staff and assets to the newly formed Federal Passenger Company, which manages long-distance
rail passenger services. Their aim is transparency of financial performance, eventual elimina-
tion of cross-subsidies, and the ability to set locally economically justified tariffs.
RZD passenger services receive several forms of financial support from the Russian Federal
Government and modest contributions from regional administrations. Revenue support of various
kinds appears to have been about RUR 41 billion (US$1.3 billion as of November 2012) or just over 15
percent of the total income of the RZD companies and subsidiaries. There is also capital support of
passenger railway links in preparation for the 2014 Sochi Winter Olympics and for a new airport link
in Vladivostok (these categories of support are clearly of a special and short-term nature). Passenger
services have also benefited from federal support of around RUR 39 billion to rail network infrastruc-
ture in 2010, although rail freight, which constitutes around 90 percent of traffic-kms in Russia, is
likely to have been the main beneficiary.
RZD raises debt for its own funded investments through loans and bonds. As at the end of 2010
total debt is reported as RUR 297.6 billion consisting of RUR denominated bonds (63 percent), Euro-
denominated bonds (15 percent), project finance (11 percent), syndicated loans (8 percent) and bilateral
loans (3 percent).
Russian passenger services earned accounting losses in 2011, but long-distance services as a whole
probably contributed positively to network infrastructure costs. Long-distance services cover about 80
percent of their fully allocated expenses and suburban/regional services about 56 percent of fully allo-
cated expenses. This implies that long-distance services cover their train operating costs (which are
expected to be less than 80 percent of the total costs) and make a modest positive contribution to infra-
structure network costs, while suburban services as a group do not even cover train operating costs.

Germany’s Funding System
Germany’s two main state-owned rail passenger service providers, DB Long-distance and DB
Regional, both benefit significantly from government financial support from two main sources.
DB and its subsidiary passenger and infrastructure companies are responsible for financing their
operations, management and maintenance expenses entirely from revenues.
However, a major portion of the revenue earned from regional passenger services (whether run by
DB Regional or private contractors) is from government funded passenger public service contracts
between the regional company and the administrations on whose behalf specific services are run
at agreed fare schedules and structures. This support represents about 56 percent of DB Regional’s
total revenue.
Moreover, while track access charges paid by operators to DB Netz are sufficient to cover the expenses
of track operation and maintenance, access income only finances a small part of the capital costs of
renewal, upgrading or of new rail infrastructure. Most of the capital cost is funded by govern-
ment grants and non-interest bearing loans, which partly come from petroleum taxes and the EU.
DB contributes funds of its own towards such projects insofar as they are in its own business interests
(it has contributed around 15-20 per cent of the total). Over the last few years, the Federal government
has contributed an average of EUR 1.2 billion/year to new-build and upgrading projects.
A third, source of federal government funding is payment to providers for trips made by certain
community groups such as severely disabled passengers, and military (or alternative) national ser-
vice travellers. This constitutes a minor portion of passenger revenue (less than 2 percent of second
class revenue on long-distance services).
The German model of concessioning of suburban/regional networks through competitive

tender has provided good value for money. According to DB, the Federal Länder (states) now have
to spend less public funds to obtain a far higher level of traffic performance in regional rail service
than at the start of the rail reform (According to the DB Annual Competition Report 2011, after adjust-
ment for inflation, the Länder received 37 percent more performance for each euro in 2009 than they
did in 1996).
Additional government support to DB companies is also given through borrowing guarantees.

This includes explicit sovereign guarantees for loans from Eurofima, a company set up by a number
of European railways to finance purchase of railway rolling stock. Because DB is 100 percent owned
by the German Federal Government, the raising of capital by the DB Group is also assisted by market
perception of an implicit government guarantee on bonds issued by the DB Group’s financing com-
pany, DB Finance.
ANNEX 1.4 ii. Indian Railway Service of Engineers,

REORGANISATION INTO 7 CADRES recruitment done through the Combined
Engineering Services. This service will be
[ALTERNATIVE VIEW ON HUMAN RESOURCE responsible for the maintenance of fixed
MANAGEMENT] infrastructure (track, formation including
bridges, buildings, signaling, over head
• While the recruitment to the Indian Railway electrical traction system etc). The initial
Medical Service, the Security Service and the qualification may be prescribed as a grad-
Indian Railway Stores Service can continue as uate in Civil or Electrical Engineering and
hitherto, the balance 7 railway cadres may be no other branch. It may be mentioned that
reduced to 4 as under: till the 1950s, Signaling Cadre was a part of
i. Indian Railway Traffic Service, recruit- the Indian Railway Service of Engineers.
ment done through the Civil Services iii. Indian Railway Service of Mechanical &
Examination as now. Electrical Engineers, recruitment done

through the Combined Engineering Ser- Jamalapur as the case may be. The impact of
vices. This service shall be responsible for combining the existing services is a prolonga-
the ‘rolling’ infrastructure, that is, locomo- tion of the probationary period by one year.
tives, coaches, wagons etc. The initial qual- However, we would have initiated a process of
ification will be a graduate in mechanical reducing the number of services and thereby
or electrical engineering. limit the problem of departmentalism in the
The SCRA exam would be done away with; organisation and attuned with the organisa-
it is a historical legacy of 1926; and when tional reforms proposed.
graduate engineers are available, the need • Officers of the two cadres— Indian Railway
for SCRA does not exist. In fact, the Minis- Service of Engineers and the Indian Railway
try had stopped recruitment for two years Service of Mechanical & Electrical Service
due to the reluctance of UPSC to conduct should be put through cross-disciplinary rota-
such a recruitment and it was restarted tion; one concomitant requirement would be
more for sentimental reasons. Qualifica- to increase the proportion of Group B officers
tions as now prescribed by UPSC do not in the cadre and reduce Group A cadre cor-
prohibit an electrical engineer joining the respondingly. A better qualified and trained
IRSE cadre or a mechanical engineer join- Group C cadre— the supervisory cadre - is a
ing the IRSEE cadre. And, the Railways sin qua non for this proposal as it is this cad-
have had such examples. re that deals with day to day operations and
iv. Indian Railway Accounts Service, recruit- management. Cross disciplinary rotation was
ment done through the Civil Services a recommendation of the Prakash Tandon
Examination as now. Committee too.
• Recruitment to the Indian Railway Person- • The candidates selected for the Indian Rail-
nel Service, now done through the Civil Ser- way Accounts Service and Indian Railway
vices Examination, may be discontinued. This Stores Service will undergo training as hith-
service was the last to be added in the 1970s. erto and of the same duration. Similar will
While it is not anybody’s argument that a spe- be the case with the Indian Railway Traffic
cialised service dealing with human resourc- Service. The Prakash Tandon Committee had
es is not required- all corporate organisations recommended that those joining the Indian
have this distinctive group to assist- the situ- Railway Accounts Service should have a
ation in IR is different. Being a part of the financial background; this can be achieved
GoI, the role a HR manager plays is limited. either by prescribing an initial qualification
All establishment policies and emoluments while applying to the UPSC or suitably includ-
are uniform for the civil services. The posts ing the subject in the training modules.
of ‘personnel officers’ can be filled by officers • Once this process of change in the initial
from the four services mentioned above, as recruitment is put in place, we can create a
was the case earlier, if necessary after a short superior managerial cadre of leaders after 14
course on HR and establishment at Vadodra. to 16 years of service from out of three ser-
• On selection to the Indian Railway Service of vices IRTS, IRSE and IRSM&E. These officers
Engineers, the candidates should be admitted can be selected by a process of assessment by a
to a preselected Institute of Technology such Committee of Members of the Board and with
as an IIT or NIT for professional training of participation by UPSC. The present practice
one year’s duration. This training will enable of basing the selection only on annual confi-
a graduate in one discipline of engineering to dential reports would be given up. The process
learn basic aspects of engineering in other dis- of selection will have well developed criteria
ciplines; thus one with civil engineering qual- such as leadership quality, decision making
ification will have adequate coverage of basic capacity, proven performance, ability to work
electrical engineering subjects and vice versa with a diverse group, analytical ability etc.
so that the officers have a holistic approach to A batch so chosen will be relatively small in
the railway related issues. The training mod- number and with their inter-se seniority fixed.
ules will thus be specific for graduates of any The batch will receive training in a manage-
one specific discipline. Similarly, candidates ment institute which will include logistics,
selected for the Indian Railway Mechanical & supply chain management, multimodal trans-
Electrical Service will undergo a year’s course port, PPP, finance as relevant for a corporate
in each other’s discipline for a good grounding body including issues related to investment
of the basics of the discipline. and its appraisal, etc. They will man the posts
After successful completion of their course, of Additional Divisional Railway Managers,
the officers of these two services will spend Divisional Railway Managers, Chief Vigi-
their further probationary period as now, lance Officers, Chief Personnel Officers, Gen-
except that they will also be trained in eral Managers etc. In this arrangement, the
the Institutes at Nasik, Secunderabd and Managers will have long stints unlike today

when the DRMs remain in the chair only for can either be on a contract basis or on regu-
2 years and the organisation suffers the con- lar employment with attractive compensation
sequences of frequent changes, lack of direc- packages.
tion and cohesion at the divisional level. This • Lateral recruitment from the market for jobs
will undoubtedly benefit the organisation and in R&D and marketing should also be con-
a sense of direction, focus will be inculcated. sidered. IR needs to transform into a smart
• Further, recruitment of highly qualified organisation through a constant process of
PhDs from IIMs/IITs and other science and technological upgrade and stress on customer
engineering institutions in India and abroad focused growth. This requires that personnel
should be encouraged for specialist techni- at all levels are recruited and trained with a
cal functions such as for structures, signaling view to building skills and attitudes required
and telecommunication, etc. Such recruits for attainment of the organisational goals.
ANNEX 1.5 has widened. Difference in ground infrastructure

RAIL CONNECTIVITY WITH and technology platforms has adversely affected
NEIGHBOURS: THE PRESENT STATE 22 interoperability. On the positive side, construction
of a rail-cum-road bridge over the Ganga (Jamuna)
Historically, the rail network of the region prior to with provision of dual -gauge rail tracks suitable for
independence and partition constituted an organic both MG and BG operation has connected the previ-
system. However, in the post- independence and post ously isolated east and west rail networks.
-partition period, rail systems of South Asia have
developed in the national context with little consid- Akhaura, which was the rail-head for Agartala
eration for cross-border connectivity and interoper- during the British colonial rule in undivided India,
ability or compatibility/uniformity of standards in served as a major link between Chittagong port and
infrastructure and equipment. The current country- Tripura. IR have now extended the MG rail network
wise status is presented below. up to Agartala and are extending it further south to
Sabroom located on Tripura’s border with Bangla-
Bangladesh: A number of connections existed desh. India has offered assistance to construct the
between India and East Pakistan (now Bangla- MG Akhaura-Agartala rail link.
desh) at the time of independence. These include:
Haldibari (India) - Chilahati (Bangladesh), Gital- Pakistan: As with Bangladesh, there used to be
daha (India) –Mughalhat (Bangladesh), Agartala several rail connections between India and
(India) - Akhaura (Bangladesh) and Shahbazpur Pakistan at the time of independence. Many
(Bangladesh) –Mahishasan (India). Many of these, of these connections fell into disuse over time.
however, fell into disuse over the years. At present, At present Attari-Wagha and Munabao-
railway systems of India and Bangladesh are linked Khokhrapar links (both on BG) are operational.
to each other at five points. Of these, three BG links, Attari-Wagha route is used to run both freight and
namely, Gede (India)-Darshana (Bangladesh), Sin- passenger services, while a weekly passenger ser-
ghabad (India) - Rohanpur (Bangladesh) and Petra- vice runs through Munabao-Khokhrapar. Other
pole (India)-Benapole (Bangladesh) are currently links which are no longer in use are: Sialkot (Paki-
open for freight trains. A bi-weekly passenger train, stan) - Jammu (India), Dera Baba Nanak (India) -
‘Maitree Express’ introduced on 14 April 2008 also Jassar (Pakistan), Hindumalkote (India) - Mandi
runs between Kolkata and Dhaka Cantt. via Gede- Sadiq Ganj Jn.(Pakistan), Fazilka (India) - Mandi
Darsana route. The other two links, though in exist- Sadiq Ganj Jn. (Pakistan), Hussainiwala (India)
ence, lie dormant at present. These are: - Ganda Singhwala (Pakistan) and Khemkaran
(India) - Kasur Tehsil (Pakistan). Uneasy relations
1. Radhikapur(IR)-Birol (BR) BG on Indian side, MG on between the two countries have prevented any seri-
Bangladesh side. Inoperative
since 1 April 2005 ous efforts to re-establish these connections.
2. Mahishasan(IR)-Shahbazpur MG. Extensive damage by Nepal: Nepal had a small narrow-gauge network.
(BR) floods. Not functional since
December 1996. Track on BR In 2004, an ICD which also serves as a rail terminal
side needs strengthening for bulk traffic was operationalised at Birgunj and
connected to Raxaul on the Indian Railway network
Over the years, the gap between BR and IR in regard through a new 6-km long broad- gauge line. It deals
to the loading capacities of rolling stock, length of with both inbound and outbound bilateral traffic from
passing loops, size of trains, braking systems, etc and to India and third country traffic through Kolkata
22. Report of the Working Group on Railways (NTDPC).

Rail Routes Surveyed for Nepal
LENGTH ESTIMATED COST RATE OF RETURN:

PROJECT (KM) (RS BILLION) PER CENT
Jaynagar-Bijalpura-Bardibas 69 4.7 -5.7
Nepalganj Road-Nepalganj 12 1.5 Negative
Nautanwa-Bhairahawa 15 1.8 -4.14
Jogbani-Biratnagar 18.6 2.1 -3.6
New Jalpaiguri-Kakarbitta 70 3.4 -3.6
Rail Routes Surveyed for Bhutan
LENGTH ESTIMATED COST RATE OF RETURN:

PROJECT (KM) (RS BILLION) PER CENT
Banarhat-Samtse 23 2.05 -4.6
Hasimara-Phuentsholing 18 1.68 6
Kokrajhar-Gelephu 58 2.94 -9.7
Pathsala-Nanglam 51 6.69 4.7

Rangia-Sandrupjongkhar
via Darranga 41 6.07 -8.2
and Haldia ports. Survey for five other rail connec- Rail linkages envisaged in the Trans Asian Railway
tions between the two countries has been conducted: project includes connections to Moreh in Myanmar
from Jiribam in Manipur via Imphal. At present,
Of the above, Ministry of External Affairs has decid- work is progressing on the construction of a new line
ed to fund the Jaynagar- Bardibas and the Biratna- between Jiribam and Imphal.
gar-Jogbani lines. These have been sanctioned and
taken up by Indian Railways for execution. In addi- In 2008, India signed the Indo-Myanmar cooperation
tion, Ministry of Physical Planning and Works, agreement on the Kaladan multi-modal transport pro-
Nepal got a techno-economic survey carried out in ject. Although this project envisages use of riverine
2006 for a rail line to connect Birgunj with Kathman- and road transport to connect Sittwe with Mizoram
du. The survey estimated the cost of the 160 km long and Manipur, a railway line from Silchar longitudinal-
BG electrified rail line along Kathmandu-Thingari- ly through Mizoram connecting Sittwe port will pro-
Kaveri-Hetuada-Pyramidi-Amlekgunj-Pathlauja- vide access to the land -locked regions of North East-
Birgunj alignment at Rs 30 billion. ern India, in particular, states of Mizoram, Manipur,
South Assam and Nagaland .
Bhutan: Bhutan does not have a railhead and is
dependent on the stations on New Jalpaiguri-Guwa- Sri Lanka: India and Sri Lanka are separated by sea
hati Broad Gauge line in North East Frontier Railway and there is no physical connection between the two
for its rail transportation. Government of India com- railway systems of Sri Lanka and India. In the past,
missioned studies for the following five connections to railway line existed upto Dhanushkoti near Ramesh-
Bhutan: waram in Tamil Nadu from where there was a ferry
service to Talaimannar in northern Sir Lanka. This
Of the above, the Hasimara-Phuentsoling line which link was destroyed in a cyclone in December, 1964.
will connect Bhutan to the Indian Railway BG network Since then railway link to Rameshwaram has been
has been proposed for construction. restored and upgraded to BG, but the link to Dhanush-
koti remains disrupted. A ferry service remained
Myanmar: Myanmar constitutes the crucial missing operational between Rameshwaram railhead to
link or land-bridge between India and South-east Asia. Talaimannar till 1984 when it was discontinued
Adequate connectivity with Myanmar would be an owing to the militancy plaguing North and East Sri
essential first step towards the integration of India’s Lanka in the subsequent years.
North-east region with South-east Asian economies.

ANNEX 1.6 nects the Indian rail network at Raxaul and runs South-
REGIONAL AND MULTILATERAL east through Barauni-Katihar-Malda Town-Singhabad
INITIATIVES FOR CROSS-BORDER RAIL to the Bangladesh, border- crossing at Rohanpur. In
CONNECTIVITY 23 Bangladesh the corridor then extends to the port of
Chittagong via Rohanpur, Abdulpur, Ishurdi, Tungi and
Both SAARC and United Nations Economic and Social Akhaura. The existing rail link from Jogbani to Katihar
Commission for Asia and Pacific (UN-ESCAP) have has been identified as part of this corridor. Proposed
attempted to draw a roadmap for regional and interna- connectivity to Biratnagar in Nepal with Jogbani (last
tional rail connectivity in the context of SAARC and station on IR) would provide a second rail route con-
Asian region respectively. necting Nepal with India and Bangladesh.
A multi-modal transport study carried out at the This corridor can potentially connect Akhaura in Bang-
instance of SAARC Secretariat suggested the following ladesh with Agartala in India and shorten the link
potential rail corridors:- between Kolkata and Agartala. Howrah-Agartala via
Guwahati is 1,561 kms against 502 kms from Howrah to
Corridor 1: The SAARC Rail Corridor 1 (2,800 kms) Agartala via Joydebpur and Akhaura.
is on BG from Lahore in Pakistan to Dhaka in Bangla-
desh and thereafter on MG on its eastern side. It is an Corridor 5: This 1,025 km Colombo-Chennai corridor
almost continuous rail link and has the potential of has the potential of further connectivity with other
moving intra-regional cargo via the shortest and the SAARC member states through the IR network. It could
fastest mode. Lahore–Dhaka containerised cargo cur- also be utilised for the movement of containerised
rently moving by a much longer rail-sea-road network traffic with transhipment to sea vessels for movement
(Lahore–Karachi–Chittagong–Dhaka) could move on across the channel connecting to the Indian mainland.
this shorter and faster corridor, saving transportation The 35 km ferry link from Talaimannar Pier in Sri Lan-
cost and transit time significantly. This route would ka to Rameshwaram in India would provide connectiv-
also facilitate traffic moving from destinations in India ity with Chennai, 653 km away, through the IR network.
to its North-Eastern states, drastically reducing trans-
portation costs and transit time (Kolkata–Badarpur via TRANS ASIAN RAILWAY
Guwahati is 1,356 km on the existing rail route against UN-ESCAP under its Asian Land Transportation Infra-
682 km via Gede–Akhaura–Shahbazpur on this identi- structure Development (ALTID) project identified three
fied corridor). Trans-Asian Railway (TAR) routes. These are: (i) North-
ern Corridor which passes through Russian Federa-
The port at Karachi could provide a shorter route for tion, Kazakhistan, Mongolia, China and Korean Penin-
international inward and outward cargo especially sula, (ii) TAR in the Indo-China and ASIAN sub- region
from North India, compared to the distance it has to starting from the Chinese border through Lao People’s
travel to and from JNPT. In fact, this corridor com- Democratic Republic and Thailand up to Malaysia (with
mands immense potential of carrying inter-con- linkages connecting Myanmar, Cambodia and Vietnam)
tinental containerised cargo, say, between Dhaka and (iii) The Southern Corridor comprising Turkey,
in the east and Europe in the west via a BG rail Iran, Pakistan, India, Nepal, Sri Lanka and Bangladesh.
network through India and Pakistan onwards to Inter-governmental agreement on TAR has been negoti-
Zahedan in Iran with only one transhipment at ated under UN-ESCAP.
Zahedan to SG for further movement through Iran
and Turkey on standard-gauge Network. The Southern Corridor commences from Kunming in
China and Bangkok in Thailand and ends in Kapikule
Corridor 2: This 707 km rail corridor, re-commissioned in Bulgaria. The total length of this route between
on 15 February 2006, connects Karachi (Pakistan) and Bangkok and Kapikule is 11,460 kms and it provides
Jodhpur (India) and thus provides connectivity to the Trans Continental rail connectivity to the countries
entire IR network. Currently, a passenger train ‘Thar of China, Thailand, Myanmar, Bangladesh, Pakistan,
Express’/’Link Express’ operates between Mirpur Khas India, Iran and Turkey. The route, as proposed, would
(Pakistan) and Munabao. enter India at Tamu, bordering Myanmar, pass into
Bangladesh at Mahisasan/Shabajpur and re-enter India
Corridor 3: This 700 km BG rail corridor provides the from Bangladesh at Gede. On the West side, this route
shortest and the fastest access for traffic to and from was proposed to enter Pakistan at Attari-Wagah. This
land-locked Nepal. The 704 km Birgunj-Kolkata port route has a missing link of 180 kms between Jiribam
via Naihati and 832 km Birgunj-Haldia via Howrah cor- and Tamu in India.
ridor has been extended by a 30 km BG line link along
Sugauli-Raxaul-Birgunj with a 6 km extension inside The Trans Asian Railway network is intended to provide
Nepal connected directly to ICD at Birgunj. connectivity between (i) capitals of member countries,
(ii) main industrial and agricultural centers, (iii) major
Corridor 4: The 1,146 km Birgunj-Katihar-Chittagong sea and river ports, (iv) major container terminals and
port corridor also starts at Birgunj in Nepal and con- depots, and (v) places of major tourist attractions.
108 NATIONAL TRANSPORT

NATIONAL TRANSPORT DEVELOPMENT
DEVELOPMENT POLICY
POLICY COMMITTEE COMMITTEE
| 2013 | 2013

SAARC Corridors
CORRIDOR COUNTRIES SERVED BASIS FOR SELECTION
Lahore (Pakistan)-Delhi/ Kolkata (India)-Dhaka Pakistan, India & Potential growth of intraregional traffic.
SRC 1. (Bangladesh)-Mahishasan-Imphal (India) Bangladesh Reduced distance and shorter transit time.
Shorter route for intra-regional traffic.

Karachi (Pakistan)-Hyderabad-Khokrapar- Access to Karachi port and potential third
SRC 2. Pakistan & India
Munabao-Barmer-Jodhpur (India). country traffic.
Access to the landlocked Nepal.

Potential corridor for third country and bilat-
SRC 3. Birgunj (Nepal)-Raxaul-Haldia/Kolkata (India) Nepal & India eral traffic (Already functional).
Access to Chittagong port for Indian and

Birgunj (Nepal)-Raxaul-Katihar (India)-Ro- Nepalese traffic.
Nepal, India & Bang-
SRC 4. hanpur-Chittagong (Bangladesh) with links to Shorter route for North Eastern States of
ladesh
Jogbani (Nepal) and Agartala (India) India through Bangladesh
Restoration of old rail ferry link to provide

SRC 5. Colombo (Sri Lanka)-Chennai (India) Sri Lanka & India passenger and goods access from Sri Lanka to
mainland South Asia
SAARC RAIL CORRIDORS
LEGEND
SR1: Lahore - Delhi - Kolkata - Dhaka - Imphal
SR2: Karachi - Hyderabad - Barmer - Jodphur
SR3: Birganj - Haldia
SR4: Birganj - Raxaul - Kathihar - Chittagong
SR5: Colombo - Chennai
National Railway Lines
NTDPC | PORTSNTDPC
& SHIPPING
| RAILWAYS 109

ANNEX 1.7 Myanmar and Thilawa near Yangon on the Bay of
THE CHINA FACTOR 24 Bengal. Mynamar would thus emerge as a possible
land-bridge connecting South Asia and South-west
Trans-continental rail connectivity as a strategic China.
tool is being deployed to great effect by China. It
has already developed transport links to the Korean Besides the Irrawady corridor through Myanmar
peninsula, South-east Asia, Myanmar, Pakistan and into the Bay of Bengal, China extends significant
Afghanistan. It is busy developing extensive multi- development assistance to Bangladesh by way of
modal connectivity in India’s neighbourhood which grant, credit, and interest-free or concessional loans
is perceived in strategic circles as an act of encircle- for important bridge works, natural gas, etc. Plans
ment. It has established a presence in Pakistan with are on the anvil, among other projects, for construct-
a new port at Gwadar and strategic linkages through ing the second Padma Bridge and a 130 km rail line
Pakistan, Iran and Central Asia. from Chittagong to Gundum on Myanmar-Bangla-
desh border. A Myanmar-Bangladesh rail link will
China Metallurgical Group Corporation, involved help connect Kunming to Chittagong as well.
in the development of the Aynak copper mines, has
signed an MoU with Afghan government on 22 Sep- In the north, China is busy extending the world’s
tember 2010 to undertake a feasibility study for a 700 highest 1,142 km Golmud-Lhasa rail line, that was
km rail-line connecting the Aynak copper mines in opened in July 2006, to Xigaze, Tibet’s second larg-
northern Afghanistan with Kabul and the two neigh- est city, 253 km apart from its capital city, with plans
bouring countries, with connectivity to ports in Iran to take it further towards Nepal, first to Nyalam,
and Pakistan (estimated cost- $5 billion). China is 400 km from Xigaze, on the China-Nepal border and
also actively working to incorporate the Gilgit-Bal- finally a 120-km extension to Kathmandu.
tistan tract into Xinjiang’s logistics grid by widening
the highway and laying a Pakistan-China rail link, In the south, a part of its ‘string of pearls’ strategy
through an MoU between Beijing and Islamabad of links with regional maritime nations, China is
for a trans-Karakoram rail line through the Gilgit- now Sri Lanka’s biggest investor as well as aid donor.
Baltistan region. Pakistan plans, with active Chinese The Economist (10 July 2010) reported that China
involvement, a 900 km rail line from Gwadar port in is financing nearly all of Sri Lanka’s biggest infra-
Balochistan on Pakistan’s south-west coast close to structure projects, e.g., a new sea port at Hamban-
the Straits of Hormuz to join the Quetta-Zahedan tota, an oil storage facility, a new airport, a thermal
line and via Dalbandin along Koh-i-Taftan (on Ira- power plant, an expressway, besides a special eco-
nian border)- Spezand-Quetta-Chaman (on Afghan nomic zone at Mirigama near Colombo. China is also
border) onwards through Khunjerab Pass in the rebuilding the main roads in the war-shattered north
Karakoram to Kashgar (Kashi) connected to Xigaze and east, and also a performance arts centre.
in China. It has planned a railway and pipeline from
Gwadar port to western China along the Karakoram Chinese road and rail connectivity projects to speed-
Highway route. ily knit the South-east Asian land mass include
the ambitious 5,380 km ASEAN flagship Kunming-
China has also plans to build a new rail corridor to Singapore rail line venture, a crucial corridor criti-
link it to the Mediterranean Sea through Central Asia, cal to the Trans Asian Railway project. China has
Afghanistan, Pakistan and Iran. It has proposed 580 been keen on connectivity of its rail network across
km rail-line from Tehran through Hamadan, Malay- those of the ASEAN region, even though there is no
er and Kermanshah to Khosravi on the border with rail linkage between China and Myanmar, China
Iraq, which will also provide a link between Arak and Laos, Myanmar and Thailand, Thailand and
and Malayer. The line will offer onward linkages via Cambodia, Cambodia and Vietnam, and Vietnam
Iraq to the Mediterranean port of Latakia in Syria, and Laos.
thereby facilitating a southern route from China to
Europe. Yet another transit route being considered China’s initiatives in expanding its rail connectivi-
is through Afghanistan and Pakistan along Askabad- ties beyond its own geographical borders has been
Torghundi-Herat-Kandahar-Chaman-Quetta. dealt with in some detail because of its overarch-
ing strategic as well as political significance for our
In the east, China has long -term plans to link up country. There are very important implications of
with the Bay of Bengal port of Sittwe (Akyab) Chinese advances in the neighbouring countries. In
through Mandalay and the Irrawady River. China is order to secure our strategic interests in the region,
also planning to build a 232-km Lashio-Muse/Ruili looking at rail linkages beyond the country’s borders
rail line that would provide a strategic link through is not an option but a compulsion. Our long-term
an extensive rail network across Myanmar. From transport policy, therefore, has to take note of and
Kunming in its Yunnan province, a network of road, provide for solutions to the challenges posed by the
rail and river links fork out to Sittwe in western Chinese initiatives in the region.

Annex 1.8
Railway Projects That Need to be Taken Up with Neighbouring Countries25
[ A ] MYANMAR
LEGEND
Track Miles in 1988 (1,976.35 Miles)
Newly Opened Lines (997.73 Miles)
Under Construction (159.21 Miles)
i. A study should be commissioned to work out the costs and other details of the Kaladan project.
ii. Jiribam-More and Seggi-Chaungh-Myohaunes lines should be constructed.
iii. Yangore Mandalay rail-link needs to be upgraded.

[ B ] BANGLADESH
BANGLADESH
Railways-2010
Bangladesh Railway Broad Gauge: Single Line, Double Line
Bangladesh Railway Metre Gauge: Single Line, Double Line
Bangladesh Railway: Mixed Gauge, Temporarily Closed Line
Foreign Railway Broad Gauge: Single Line, Double Line
Foreign Railway Metre Gauge: Single Line, Double Line
International Boundary
River & Lake, Capital
Published under the direction of Director General, Bangladesh

Railway, Rail Bhaban, Dhaka
i. The old links between the two countries need trade between Bangladesh and Nepal through
to be restored for the sake of the development India.
of India’s North Eastern states as well as for iii. Haldibari-Chilahati link needs to be restored
the sake of better relations with our most for trade between Bangladesh and Bhutan
populous neighbour. These would include: through the Indian Territory.
Haldibari (India)-Chilahati (Bangladesh), iv. Agartala (India)-Akhoura (Bangladesh) con-
Gitaldaha (India)-Mughalhat (Bangladesh), nection needs to be re-established to provide
Agartala (India)-Akhaura (Bangladesh) and the much-needed direct rail link to states like
Shahbazpur (Bangladesh)-Mahishasan (India). Tripura, Mizoram and Manipur to Chittagong
ii. Radhikapur (India)-Birol (Bangladesh) line port.
needs to be reopened to facilitate transit

[ C ] BHUTAN
B.G. M.G. N.G.
DOUBLE SINGL E
i. The 17.5 km long Hasimara (India)-Phuentsholing (Bhutan) which has been identified for execution
should be constructed. Issues relating to land acquisition need to be addressed by the State and the
Union Government.
[ D ] NEPAL
i. Jaynagar-Bardibas (69.10 kms) and Jogbani-Biratnagar(18.60 km) lines costing Rs 4.7 billion and Rs 2.1
billion respectively and being entirely funded by the Government of India should be expedited.
ii. Nepalganj Road-Nepalganj (12.11 km), Nautanwa-Bhairahwaha (15.30 km) and New Jalpaiguri-Kakra-
bitta (46.30 km), which have also been surveyed, should be taken up by the Government of India.
iii. Rail connectivity with Nepal assumes special importance in view of the China factor discussed earlier.
China is planning a rail line between Lhasa and Kathmandu. Strategically, it would be in India’s inter-
est to construct the Birganj-Kathmandu line (160 km). The cost of this line as estimated by Pipavav
Rail Corporation Ltd. (PRCL) is Rs 12.85 billion (2006). This project admittedly will not be financially
viable but it will be in India’s strategic interest to undertake the project at its cost if it has to preserve
its preeminence in Nepal.

[ E ] SRI LANKA
UDAGANANDALAN
ONALUR
NETTU PALAIYAN SALEN CUDDALORE
CALICU T
COIMBATORE ERODE R
AYU
IRUGUR A NJ
KARU R
TH
SHORAPU R KARAJKAL
GURUV AYUR NAGORE
TRICHUR TIRUCHCHIRAP PALI
ERNAKULAN DINDIGUL
BODINAYAKKANUR
AGASTIYANPALLI
COCHIN
HARBOUR NADURAI KARAIKUDDI
ALLEPPE Y VIRUDUN AGAR
KAYAHKULAH
RAMESHWARAM Dhanushkoti
QUILOI TEHKA SI
Talaimanner
TIRUNE LVELI
TUTICORI N
TIRUCHENDUR
TRI VANDRUM
SRI
LANKA
i. Rameshwaram-Dhanushkoti (17km) railway link and Dhanushkoti-Talaimanner ferry service should

be revived for faster, easier and convenient communication between India and Sir Lanka.

[ F] PAKISTAN
‘INDIA - PAKISTAN RAIL LINKS’
1. EXISTING RLY LINKS
2. RLY LINKS FOR

CONSIDERATION 1 - 6
*SIALKOT - JAMMU
(PK) IN)
*KHEMKARAN - KASUR
(IN) (PK)
*HUSAINIWALA - GANDA
(IN) SINGHWALA
(PK)
*FAZILKA - MANDI
(IN) SADIQ GANJ
(PK)
*HINDUMALKOTE - MANDI
(IN) SADIQ GANJ
(PK)
*DERA BABA JASSAR

NANAK - (PK)
(IN)
i. The following links should be revived and rebuilt: Sialkot (Pakistan)-Jammu(India), Dera Baba
Nanak (India)- Jassar (Pakistan), Hindumalkote (India)- Mandi Sadiq Ganj Jn.(Pakistan), Fazilka
(India)- Mandi Sadiq Ganj Jn. (Pakistan), Hussainiwala (India)-Ganda Singhwala(Pakistan) and
Khemkaran(India)- Kasur Tehsil(Pakistan).

116
Annex 1.9
International Experience in Railway Reforms
JAPAN NATIONAL RAILWAY RUSSIAN RAILWAYS GERMAN RAILWAY REFORM BRITISH RAILWAY CHINESE RAILWAYS
NTDPC~Vol 03_Part 1~Ch 01.indd 116

Problems of Erosion of market share Rapid fall in traffic Poor performance Shrinking market share Requirements of transport capacity and
Railway and Aims Heavy debt burden Efficiency of the system Loss of market share Poor financial health quality of service
of Reform Inadequate investments High amount of government subsidy/debt Separating state control from economic
EU directive to open up infrastructure activities
Orienting railway institutions towards
transport market
Institutional JNR’s management reported to a board of Russian federation has a The West German system was referred To British railways was oper- Chinese railways functions under the
and Regulatory directors. The governor of the board was monopoly and carries half as Deutsche Bundesbahn (DB). The Govern- ating as a single integrated ministry of railways and has 14 regional
Framework prior appointed by the Cabinet and s/he in turn of the freight ton as com- ance of Deutsche Bundesbahn was heavily entity including track main- administrations. The government is involved
to reform appointed other directors with the approval pared to 8 percent in the centralised and had several public service tenance, train operations, in planning, operation, and regulation of
of the Minister of Transportation. As public European union. The road obligations. The workforce enjoyed the sta- and supporting activities. Chinese railways. There are no separate
corporation JNR was not subject to same network is comparatively tus of being civil servants. It was speculated It functioned under British suburban railway operations. New operators
civil and commercial laws of private compa- weaker and is not able to that it under reported deficit. railways board. Around do not have access to infrastructure.
nies. Its employees and officers where public provide competition. 1980, ancillary activities
servants, they had right to organise into The state owned railway carrier of East (hotels, ferry service, rail
unions and negotiate labour contracts, but Under the federal rail Germany, i.e. ‘Deutsche Reichsbahn’ (DR). vehicle manufacturing busi-
did not have right to strike. It had obligations transport law, railways The infrastructure of DR was in poor state. ness) were sold to private

beyond profit making objective. It also had were unified under the It was state owned monopolist undertaking player.
to operate in low density lines that were direct management of and the socialist nature of political system
not economically viable under the political Russian federation. The meant that there was no objective of earning The service was organised
directions. infrastructure and opera- profit from the business. In 1975 an attempt on business service lines
tions were not accounted to focus on high ridership routes was made, including intercity opera-
for separately. There was however it was stalled by the federal states, tions, network south east,
no open access for other town halls, and unions due to the fear of clos- regional railways, euro
operators either for freight ing of various routes. passenger service, train
or passenger transport. The railway had to compete with a well load freight and rail freight
developed road network and a population distribution.
with high car ownership rate.
Reform Restructuring of JNR involved the reorgani- The first stage was In 1980, the accounting method of Deutsche The reform process was Asset Operation Liability System, which
sation and reassignment of core businesses, corporatisation of Russian Bundesbahn was changed to introduce an extreme case which was started in 1999, has made managers
assets and operations, organisational Railways Limited (RAO RR) higher degree of detail, in order to identify involved fragmented struc- of regional railways administrations (RRA)
structure, work force, management, liabili- and creation of subdivi- the origins of the deficit, particularly in local ture in order to introduce accountable for returns on capital, output,
ties, and commercial orientation among the sions for and regional passenger transport. Three competition. Infrastruc- profitability and safety. RRAs are account-
successor companies. Freight cost centres were identified: ture was separated and able for capital expenditure. Individual
Infrastructure maintenance Public service obligations, i.e. local and privatised in 1995. By managers also receive financial incentives
JNR operation was divided into six separate and development regional passenger transport 2001, it was considered as for better performance. It has focused on
passenger and a freight companies. The pas- Locomotive traction The remainder of the transport failed move due to poor improving its employ productivity and reduc-
senger rail companies were organised into Long-distance passenger Infrastructure as a public obligation maintenance. The renewal ing staff costs.
three contiguous regions on the main island service contracts were found to
and one region on each of the three islands 17 regional suburban However, the accounting did not separate be badly designed. It was Chinese railway has also done away with
of Hokkaido, Shikoku, and Kyushu. The main railways the profits between infrastructure and op- bought back. below cost provision of passenger services.
reason for this division was the fact that Maintenance of carriage eration and ended up as becoming a means It has separated non-core activities such
95 percent of all the trips originated and and locomotives to justify public subsidy. as enterprises dealing with construction,
terminated within one of these services Construction manufacture, telecom, design, education and
territories. Research and development social activities. Many of these enterprises
(Contd...)
15-04-2014 11.16.41 AM
Reform Freight operations were organised into a In the second stage, private Another round of reform started with The passenger operation now provide services to China Railways on
separate company with a nationwide service sector was encouraged to merger of DB and DR in January 1994. It also was split into 25 companies a competitively tendered basis. In the area
territory. This freight operation company involve into freight traffic attempted to separate commercial activities later consolidated into 19. of rolling stock, this has resulted in very
had no ownership of tracks but would get movement and mainte- from liabilities. DB AG, the commercial divi- Three passenger rolling rapid modernisation of products as a result
the access to the rail network through track nance activities. Increasing sion, was formed as a joint stock company stock leasing companies of several joint ventures with foreign firms

usage contract with other newly formed passenger and suburban under private law. BEV, the public division, were established for leas- that became possible due to separation of
regional rail companies. operation competition is administered by the Federal Transport ing rolling stock and were production units.
also on the anvil. Ministry and the Federal Finance Ministry, ultimately sold. Freight
All non-core assets and liabilities of the was created to take the liabilities. Infra- operation was sold with Chinese railways also removed a whole layer
former JNR in excess of those assigned to structure was separated from operations. open access. of management by eliminating the 44 sub-
the individual companies were conveyed to a Subsequently, the rail was also opened up regional administrations.
new entity i.e. JNR Settlement Corporation, a of the rail network for third parties against Network Rail was named
government agency. The Settlement Corpo- the payment of track charges. The federal as the infrastructure Management was consolidated at the level
ration, which held the shares of each of the railway agency was founded as a regulatory company. The government of the 18 regional administrations and some
seven operating companies that emerged agency, while the financial and contract sets the expectations for 60,000 staff positions were removed. All
from the restructuring, was intended to liq- responsibilities for regional services were Network Rail and specifies stations and depots now report directly to
uidate the assets it held, including the most transferred to states. the passenger service RRAs and train control centers were also
important i.e. excess real estate, to pay back requirement. The regulator consolidated at RRA level. This was made
as much as possible of its outstanding liabili- determines the efficiency possible by advances in communication
ties with the proceeds of this liquidation. In 1999, five joint stock companies were targets and decides on the and information technologies. This change
created: competition issues. brought together management responsibil-
The new regional companies were trans- DB Reise und Touristik AG (long distance ity and accountability at the regional level.
formed as joint stock companies, each with passenger transport); It also facilitated and encouraged higher
its own board of directors and management. DB Regio AG (local and regional passenger utilisation of locomotives and crews, which
The organisational structure was similar in transport); had normally been changed at sub-regional
JNR and the regional companies, except that DB Cargo AG (freight transport); boundaries.
in the regional companies departments re- DB Netz AG (infrastructure);
lated to railway operation were put together DB Station and Service AG (passenger Recently, in March 2013, China has decided
within the new Railway Administration unit, stations) to dissolve the Ministry of Railways (MoR)
so that operation-related decisions can be and separate railway policy and regulation
taken in a more coordinated way. Since the DB Reise & Touristik AG and DB Regio AG, from commercial operations. As a result
regional departments of regional companies the companies responsible for long-distance the functions of railway sector policy and
were smaller than that of JNR, meeting local and regional passenger transport respec- regulation, particularly in respect of safety
needs was manageable because of smaller tively were merged for better control on in construction and operation of railways,
size. passenger transport. were assigned to the Ministry of Transport
(MOT).
The Supervisory Committee estimated In December 2007, DB AG reorganised again
that JNR had approximately 93,000 excess bringing all passenger services under DB In future, MoT would also establish policy for
employees. The restructuring plan made Bahn, freight and logistics services under railways. It would develop a unified policy for
specific provisions for surplus employees: DB Schenker, Infrastructure and operations all transport modes aiming at modal integra-
under DB Netz. In June 2008, passenger and tion and optimal use of resources.
1. logistic services were brought under a new
A special fund was set up for early voluntary company DB ML AG. In 2008, Federal Gov- The responsibility for the enterprise (com-
retirement of 20,000 employees ernment and the parliament agreed to the mercial operations of railways) has been
2. partial privatisation (24. 9 percent) of the DB assigned to the newly formed China Railway
Provisions were made to transfer 32,000 ML AG. IPO of DB Mobility Logistics AG was Corporation (CRC) that is manned virtually
employees of the newly formed regional planned in October 2008 but was deferred by all the staff and managers of MOR except
passenger companies to other parts of JNR due to economic recession in the market. a few that will move to MoT.
3.
Remaining 41,000 excess employees were
assigned to the Settlement Corporation
In spite of these, JNR restructuring faced
union oppositions from the employees and
were dragged to the court of law. JNR Set-
tlement Tribunal failed to manage the debt
was later dissolved. Its assets and liabilities
were inherited by Japan National Railways
Construction Cooperation, a government
NTDPC | RAILWAYS
entity.
117
(Contd...)
15-04-2014 11.16.41 AM
118
Improvement The market share of railways both in passen- The performance has The reforms were able to arrest decline in Some aspects of reform The Chinese railway has performed well
in finances of ger and freight transport increased substan- improved and better modal share. Major traffic growth in overall have been successful: with these changes. It adopts a market
railways tially after the reform process. The financial accountability has been passenger and freight market was observed. Privatisation of freight culture and tries to match its services with
health of the privatised firms improved. achieved. The freight share also increased. The open operators customer requirements. It has been able
The market share of the high speed railway access operations, primarily run by private Privatisation of passen- to progress on creating one of the largest

was as high as 65 percent to 80 percent on sector also grew over the years. ger rolling stock leasing networks in a very short span.
various routes. companies
After privatisation, both

passenger and freight traf-
fic have increased. Along
with the traffic, costs have
also increased.
One aspect of reform which

has not been very success-
ful is managing the inter-
face between infrastruc-
ture and operations, both
for investment decision
making and operations.

Source: NTDPC Research.
15-04-2014 11.16.41 AM
Annex 1.10
International Experience in Setting Track Access Charges
[A] Australia: Interstate Freight
The Australian Rail Track Corporation (ARTC) publishes a list of Reference Tariffs for track access
on each of its routes. The Reference Tariffs are based on a fixed component (referred to as a ‘flagfall’)
per train for each route, plus a variable element that depends on the gross tonne-km of the train. The
fixed element itself is actually fixed for different routes reflecting the length of route, so is basically
distance-related rather than a true ‘flagfall’. This distance-based component is affected by the speed of
train and whether the train path is peak or off-peak.
The different train types are listed in Table below. The current Reference Tariffs for the different train
types on different routes is publicly available and can be reviewed on line. The pricing formula is the
same for each route and the tariffs are shown separately by route for convenience of customers.
FLAGFALL TRAIN TYPE AND DESCRIPTION TRAINS

Super Premium Max train speed 130 km/h XPT (fast passenger train)
Max axle-load up to 20 tonnes
Premium Max train speed 115km Passenger, Bi-modal
High Max train speed 110km/h Superfreighters
Length up to corridor standard max
Standard Max train speed 80km/h Express goods
Max axle load up to 23T
Length up to corridor standard max
Low Off -peak train paths Metro shunts/work trains
The Reference Tariffs relate to a particular (standard) service performance specification. There can
be negotiation with individual customers for specific needs or service characteristics that vary from
the reference assumptions; for example, with respect to axle loads, speed, train length, origin and des-
tination, stops and operating timetable. However, ARTC has undertaken to the Australian Competi-
tion and Consumer Commission that it will not charge different prices to different clients where the
characteristics of the service are alike; and where the applicants are operating within the same end
market. ARTC also specifically undertakes not to discriminate pricing on the basis of whether the
Train Operating Company is privately owned or owned by a state or federal government. All negoti-
ated tariffs are also published.
The fixed component is paid for the right to reserve a train path and is payable by the customer wheth-
er they use the train path or not. The ARTC has also undertaken to the Australian Competition and
Consumer Commission to limit the increase in the Reference Tariffs to a rate below the inflation rate,
as its own efficiency incentive.
Source: Freight Railways Governance Organisation and Management: An International Round-up, World Bank, Page 38-39, Paul Amos, July 2011.
[B] Canada: Interswitching
Canada has many examples of what are referred to as ‘voluntary running rights’ which are commercial
agreements between two railway companies (usually between Canadian National and Canadian Pacific
companies) to allow one to run its trains on the track of the other. There are also some broader access
provisions administered by the Canadian Transportation Agency (CTA) which administers interswitch-
ing rights (a form of limited- distance track access rights) and sets the access tariffs. CTA can also impose
more general running rights, where one railway seeks to operate on the lines of another. Interswitch-
ing rights allow freight customers with access to a federal (inter-province) railway (basically Canadian
National or
(Contd...)

Canadian Pacific) to have cars transferred (interswitched) onto another federal railway if the point of
origin or destination is within 30km of the interchange point. This provision basically avoids the need to
transfer wagons from one train to another for short distances at the beginning and/or end of journeys.
The tariffs for this form of track access are set by the CTA because it is not convinced that market forces
could otherwise protect shippers from the market dominance of one railway service provider. The CTA’s
Regulations establish four distance zones within the 30-kilometre radius and prescribe rates per car for
interswitching traffic to or from each zone. The rates are based on the estimated costs of interswitching
traffic borne by the Canadian National Railway Company and the Canadian Pacific Railway Company.
Lower per-car rates are prescribed for the interswitching of blocks of 60 or more cars as a unit. The Cana-
dian Transportation Act requires that the Canadian Transportation Agency examine railway costs in its
determination of the rates and stipulates that the resulting rates shall not be less than the average vari-
able cost of moving the traffic. The interswitching rates are also subject to section 112 of the Act, which
requires that rates established by the Agency be ‘commercially fair and reasonable to all parties’.
As noted, imposed running rights can also be mandated by the CTA on a federal railway, if it decides this
in the public interest. In practice, the CTA’s power to approve such applications (and so confer wider track
access rights) has rarely been used and most examples of running rights in Canada have been by private
agreement (voluntary running rights). If the CTA does grant an application for running rights, the two
railways have the opportunity to negotiate the tariff for track access. If the negotiations fail, the Agency
may determine the financial compensation to be paid.
[C] United States of America: Track Access Agreements
Privately negotiated track access agreements have a history as long as railways themselves. Early rail-
way companies in most continents were regionally rather than nationally based. In the boundary areas
in particular they had a strong incentive to come to agreement to use each other’s tracks to reach major
business origins and destinations that lay over their own company’s boundaries.
Access by private contract is the predominant form in the World’s biggest single freight railway market,
the USA. In 2010 for example there were over 550 common carrier freight railways operating in the USA.
They include seven major (Class 1) railways, 31 regional railways 314 local railways, 204 switching (shunt-
ing) and terminal railways, plus 2 Canadian railways operating in the USA. All the Class 1 railways and
around 90 percent of the rest are privately-owned. United States Law does not give any legal rights of
access of one freight railway company over the tracks of another freight railway company.
However, under US Competition Law, railways have ‘common carrier’ obligations to freight customers.
They must provide to customers routes and tariffs to move traffic from any origin to any destination on
the railway network. If it is necessary for more than one railway to participate to complete the traffic
movement the railways must interchange the traffic and establish a tariff for the total movement. Howev-
er, as an alternative to interchanging the traffic, a railway can complete the movement with its own trains
by entering into track access agreement with one or more other railway(s). Around 37,000 km of route
operated by US railways is on track owned by another railway. That is equivalent to around a quarter of
the total route-length of the network.
Agreements that set out the conditions and prices for use of another railway’s infrastructure are known
generically as ‘trackage agreements.’ They exist in many different forms. They can include agreements to
use specifically defined sections of track, to use terminals, to use shunting yards, or to use ‘haulage’ (i.e.
the locomotives and crews) of another railway entity. The agreements vary but will typically set out the
services to be performed and the performance level agreed, (which will generally be an undertaking to
provide the same level of service as the host railway provides to its own trains of the same type or volume
- i.e. without discrimination). Any additional expenses borne by the host railway such as fueling costs,
rolling stock repairs etc. are charged back to the guest train operator at agreed rates.

Annex 1.11
Line-of-Business Management Structures
The managements of most major freight railways in the countries reviewed have adopted lines-
of-business (LOB) structures. This has been partly to better tailor products and customer care to the
target markets, because each market has different customers with different needs. Equally importantly
(and like the split of freight and passenger services) it has also been to devolve management of specific
segments to line managers, thereby making a complex freight business more manageable. Most freight is
consigned by relatively few corporate customers who employ a small number of logistics decision mak-
ers. It is both desirable and feasible for LOB managers and marketing staff to get close to these custom-
ers, understand their businesses, assess their needs, determine whether railways can meet these needs
economically, and try to match product to commodity or customer.
LOB structures are applied in several different forms. LOB structures can be implemented through
Product Managers responsible for client relationships for defined markets or products and who ‘transact’
internally in the railway to plan and monitor delivery of the services sought; with agreed internal ‘cost
rates’ or ‘prices’ for those services, management accounting systems can also segment financial perfor-
mance according to LOB and so devolve ‘bottom-line’ accountability to product managers. LOB for larger
traffic segments (say, coal or intermodal business) can be divisions of the company with management
responsibility for dedicated rollingstock, terminals and other assets. Ultimately, LOB may be established
as separate or subsidiary companies, particularly if services are so specialised that the required market
profile and/or skill-set needs to be differentiated from that of the railway itself. Freight railways in the
countries reviewed display elements of all these LOB models, sometimes within the same railway. There
is no best approach. It all depends what the management thinks will work best in the context of its corpo-
rate aims and the nature of markets on offer.
It is not possible to create an effective LOB organisation simply by creating segmented account-
ing systems or appointing segment marketing managers. Accounting and Marketing structures are
tools of LOB, not the other way around. Finance departments need to adapt their accounting procedures
to an authentic and agreed LOB structure, otherwise there will be no constituency of support for the
accounting structures required and no market for the information they can provide. Similarly, marketing
managers can discern client needs but if they have little influence and no control over product design and
delivery, the implementation of LOB will probably fail. LOB management must be structured to suit the
business and be holistically applied in the sense of linking market need, service response, and account-
ability for outcome.
Nevertheless, LOB management has led to the transformation of railway freight marketing.
Those railways organised by LOB tend to have individual marketing teams specialising in the industry
or customer group concerned. When railways still had monopoly power in freight, the main function of
the Marketing Department (if there was one) was taking wagon orders, completing waybills and handling
complaints; they employed clerical skills appropriate to clerical tasks. Rail freight providers today need
marketing groups who can manage client relationships and not just client paperwork.

Renner, Michael and Gardner, Gary (2010) Global Com- World Bank (2011c) Railway Reform: Toolkit for
petitiveness in the Rail and Transit Industry. World- Improving Rail Sector Performance. Washington D.C.
watch Institute.
Zhongxi, Qi and Jianxiang, Yang (2013) China imple-
Singh, K.P. (2013) High Speed Rails: A Worldview and ments radical railway reform. International Railway
its Relevance to India, RITES Journal, (15) 1. Journal, August 2.
Scales, John, Sondhi, Jitendra and Amos, Paul (2012) Websites:

Fast and Focused—Building China’s Railways. China
Transport Topics No. 03, World Bank Office, Beijing. http://civilaviation.gov.in/CRSS/Commission%20
of%20Railway%20Safety.html. (accessed 23 September
World Bank (2011a) Freight Railways Governance, 2012).
Organisation and Management: An International
Round-up (a resource paper prepared by The World http://www.railway-research.org/Chinese-Academy-
Bank for NTDPC). Paul F. Amos, July 2011 . of-Railway (accessed 16 December 2013).
World Bank (2011b) Passenger Railway Institutions and

Financing: China, Germany, Japan and The Russian
Federation (a resource paper prepared by The World
Bank for NTDPC). Paul F. Amos, 5 September 2011.

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1.

NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

NTDPC~Vol 03_Part 1~Ch 01.indd 2 15-04-2014 11.15.51 AM

NTDPC~Vol 03_Part 1~Ch 01.indd 3 15-04-2014 11.15.53 AM

CURRENT STATE OF INDIAN RAILWAYS 7 ORGANISATIONAL REFORMS 78

MAJOR ISSUES CONFRONTING RAILWAYS 39 REFERENCES 122

2 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

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INTRODUCTION of passenger km) and the fourth largest rail freight

1. Comprising 12,000 passenger trains and 7,000 freight trains.

NTDPC~Vol 03_Part 1~Ch 01.indd 3 15-04-2014 11.15.54 AM

5,275 Billion 5,930 Billion 1,325 Billion

4 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

NTDPC~Vol 03_Part 1~Ch 01.indd 4 15-04-2014 11.15.54 AM

6. McKinsey and Company (2010).

NTDPC~Vol 03_Part 1~Ch 01.indd 5 15-04-2014 11.15.54 AM

6 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

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Current From current trajectory... ... to balanced modal mix

NTDPC~Vol 03_Part 1~Ch 01.indd 7 15-04-2014 11.15.55 AM

Suburban and Non Suburban

Source: Report of the Working Group on Railways (NTDPC), Yearbook 2010-11.

8 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

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Year 1951 to 2001 Year 2001 to 2011

Suburban Non Suburban Suburban and Non Suburban

NTDPC~Vol 03_Part 1~Ch 01.indd 9 15-04-2014 11.15.56 AM

10 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

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64,460 km Length of route network as of March 2011

LINE CAPACITY UTILISATION OF SECTIONS ON HIGH DENSITY NETWORK IN 2009-10

Less than 80%

Delhi - Guwahati via Sitapur- More than 150 %

212 Total sections on the High Density Network (HDN)

189 Sections with line capacity utilisation exceeding 80 per cent

Source: Ministry of Railways, Yearbook 2010-11.

NTDPC~Vol 03_Part 1~Ch 01.indd 11 15-04-2014 11.16.00 AM

COUNTRY EXAMPLES OF HEAVY-LOAD TRAINS AND TYPICAL FREIGHTERS

Brazil Typical freighters: Various

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Source: Report of the Working Group on Railways (NTDPC).

NTDPC~Vol 03_Part 1~Ch 01.indd 13 15-04-2014 11.16.01 AM

192 Food Grains

Source: Ministry of Railways Yearbook 2010-11, Yearbook 2005-2006, Yearbook 2004-2005.

14 NATIONAL TRANSPORT DEVELOPMENT POLICY COMMITTEE | 2013

NTDPC~Vol 03_Part 1~Ch 01.indd 14 15-04-2014 11.16.03 AM

Loading (Million Tonnes) Freight output (Billion NTKMs) Lead (Km)

PARCEL BUSINESS The importance IR attaches to this segment of busi-

NTDPC~Vol 03_Part 1~Ch 01.indd 15 15-04-2014 11.16.03 AM

Output (NTKM + PKM) in Billions

1.0 (in Billions) 1.1 1,000

0.6 531 600

0.2 0.33 200

No. of Staff (in Millions)

OTHER BUSINESSES It is, however, important to compare productiv-

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Locomotive productivity: The achievable productivity is partly influenced by the markets offering,

Asset Productivity Estimates (2009)

CHINA 39 146 11,816

CANADA 5 112 11,099

BRAZIL 9 103 8,334